The end of 2011 marked a decade since Goldman Sachs economists coined the acronym "BRIC," neatly encapsulating what they forecast would be the engines of global growth in the 21st century. Indeed, the economies of Brazil, Russia, India and China have all powered ahead, expanding even more quickly than expected in the decade since the moniker came into existence.
But a recent slew of bad economic and political news emanating from all these countries suggests that the next 10 years may prove more difficult for the BRIC growth club. In particular, worrying indicators from New Delhi have taken the sheen off the country's economic miracle, raising the possibility that India may find itself pushed out of the quartet altogether.
India's economy is growing at its slowest pace since 2009; FDI is drying up and even foreign institutional investors are on the retreat, sending the rupee to record lows against the dollar and driving Indian equities to the bottom of the BRIC league table. Inflation remains stubbornly high near double-digits, and the country's current account deficit is soaring.
So, what has made India the weakest link in the BRIC chain? Clearly, malaise in the global economy has had a negative impact on the country. But, at the heart of India's woes lies a sclerotic political elite that remains ambivalent about changing course even as the country's economic outlook grows dim.
Barring a handful of reformers, India's top leadership seems to be lacking in conviction about the benefits of liberalization. The Congress Party, often credited with opening up India's economy in 1991, is now facing questions about whether it believes in free markets at all. Time and again, it prioritizes crudely populist wealth redistribution measures over giving its people opportunities to create their own wealth.
Indeed, the government of Prime Minister Manmohan Singh has not introduced any significant reforms since it was returned to power in the 2009 general election. The failure of the United Progressive Alliance (UPA) to drive its legislative agenda has been particularly bewildering given the steady erosion of Leftist influence, which has traditionally acted as a drag on reforms.
The most recent example of this failure of leadership came in December. Having previously sought to ease investment regulations for foreign multi-brand retailers like Wal-Mart among others, the UPA performed a hasty and undignified about-face when confronted with pressure from the opposition and the smaller regional parties that make up the ruling coalition.
Rather than trying to seize control of the Wal-Mart debate, or even try to convince the electorate of the merits of their position, Indian leaders reversed course almost on instinct. An inability to build and lead a broad-based consensus on the issue allowed relatively narrow but vocal vested interests to drown out other perspectives. As a result, it was not senior officials but the op-ed columnists of the country's English-language media who were left to outline the benefits of increased foreign investment in retail.
Even India's new crop of young political leaders has failed to effectively take up the mantle of dynamism and change. Although Rahul Gandhi, son of Congress Party President Sonia Gandhi, is the most visible member of this youthful cohort, he is by no means alone in his seemingly limp embrace of reform. Far from forming the vanguard of a generation of change agents, there is a real risk that they will perpetuate the status quo of hereditary politics that has propelled them into power. According to author Patrick French's study of family-based politics in India, every MP in the lower house of the Indian parliament under the age of 30 has inherited a seat.
Though steeped in generations of its own dynastic politics, the Congress Party still prides itself on its links to the aam aadmi, or "common man." Perhaps unsurprisingly, its constituents view things differently. Public outrage at the recent slew of corruption scandals, embodied by the Anna Hazare movement, caught politicians completely off-guard. They struggled to respond to the protests, which crystallized middle-class disgust with venal officials. Their bumbling, ham-fisted reaction was rooted in the mistaken view that, after decades of License Raj rule, Indians had become inured to the low-level buzz of corrupt officialdom in their lives.
Even India's largest companies are growing weary of the graft and regulatory uncertainty inherent in doing business at home. Conditions are so tough that, despite a huge and growing domestic labour pool, many firms prefer to seek opportunities further afield. In fact, central bank statistics show that local firms have invested more overseas than foreign companies have in India since 2010.
Time is certainly of the essence. The window of opportunity afforded by a demographic dividend and increasing economic globalization will not remain open indefinitely. Failure to capitalize on these tailwinds could mean more than merely tumbling out of the elite BRIC club.
The venality, equivocation and change-aversion of India's leaders could jeopardize the country's long-term economic prospects and prevent it from realizing its ambition to become a 21st century global power.
Follow Urmila Venugopalan on Twitter: www.twitter.com/@Urmila_V