Many emerging markets and less developed countries are closely linked to the development of the United States; according to my own definition emerging markets have taken more structural steps in a promising direction than all the clearly lagging developing countries in the world. Growth and market potential is simply more favorable in emerging economies.
This is why Western investors, financial and academic analysts often emphasize on emerging economies. I myself have been doing this for many years at Linnaeus University. Many analytical tools for the studies of emerging markets are similar to those being applied to advanced countries – but quite a number of these analytical tools are also different or have to be used additionally. For example, institutional conditions like transparency and the quality of statistics or ethics are different. But also the interpretation of widely published statistics – such as for GDP growth and inflation – differs normally between developed and less developed countries for the same statistical number.
Examples of emerging countries are – when quoting the IMF (see https://www.imf.org/en/Publications/WEO ) – in alphabetical order: Argentina, Brazil, Chile, China, Colombia, Egypt, India, Indonesia, Kazakhstan, Lebanon, Malaysia, Mexico, Nigeria, Peru, the Philippines, Russia, South Africa, Turkey, and the Ukraine. So much in general terms.
Strong impact of the U.S. on emerging markets’ exports
As much as one sixth of total exports from the emerging and developing world goes these days to the U.S. Many of these countries are, particularly hit by raised U.S. tariffs – also since tariffs for many of these countries have been raised unevenly. This could mean new conditions for competition.
Emerging countries for which the U.S. is the main market for their exports are listed in the following table (https://www.cia.gov/the-world-factbook/field/exports-partners/). One could find there in 2023, for example, the U.S. as the number one export market for Mexico (76 % of total exports), Cambodia (36 %), Vietnam (28 %), Columbia (27% ), Sri Lanka (22 %), Ecuador (22 %), India (19 %), Thailand (18%), Bangladesh (16 %), Kenya (10 %) and as the number two market for Chile (16 %), Peru (14 %), The Philippines (13 %), Malaysia (12 %), Brazil (10%), Indonesia (9 %) and South Africa (8 %) among others.
Conclusion: When looking at the tariffs that have been (preliminarily?) implemented by President Trump (see https://dimerco.com/news-press/us-tariff-update-2025/ ), one can recognize that the emerging markets quoted above (and many others) are heavily hit by the American protectionist tariffs – meaning a negative impact on the potential output of these emerging countries. Logically, the less developed countries are hoping that (more) free trade will come back not too far away – and so do many Western corporations which could benefit themselves from better export conditions of emerging countries to the U.S. Such a development would improve GDP growth in emerging countries and their future inflow of new U.S. dollars for widened imports – and, thus, create improving Western market conditions in parts of the emerging market area as well.
Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Originally, BRIC was started as a financial investment idea in promising emerging markets. In other words, BRIC was in the beginning a financial construction for investing in well-growing emerging markets. B stood for Brazil, R for Russia, I for India and C for China. Later, also South Africa – representing the S in BRICS – was enabled to join.
New conditions
What initially seemed to be an interesting innovation, has in the meanwhile developed into a completely different and in many (financial) aspects into a financially obsolete product.
Growth and other economic conditions have changed profoundly since the start of BRICS. Chinese growth has been slowing down considerably, Russia suffers from burdening war effects, Brazil is economically unstable though recently improving somewhat and India, on the other hand, has more strongly moved in the right direction.
In other words: We have seen that the BRIC(S) countries did not have a homogeneous development in recent years. Rather the opposite – but not as a positive contribution in a diversification sense.
More lately, BRICS countries have also suffered from President Trump’s tariffs and increasing global uncertainty about particularly emerging markets. These tendencies should lead to the question what may happen to BRICS in the future. Will BRICS recover as an important but not very powerful group of emerging markets or move into a different direction with China as an increasingly active driving force, favoring its own political interest and influence?
Conclusion: My own guess is that the latter alternative seems to be the most probable one since China already since a number of years ago has demonstrated an increasing strategic political interest in modernizing emerging and less developed countries. These countries may be particularly relevant when they can provide China with important commodities.
We know by now that Chinese decision makers are excellent strategist both when it comes to short-term and long-term strategies.
BRICS fits well into this specific context.
Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Recently, in 2023, India has become the most populous country in the world – often commented with the additional remark that China on the other hand still has a much larger economy. This is certainly true. However, India’s economic growth rate is now exceeding China’s, causing quite some increase of foreign interest in this giant country. But there are also other reasons for the conclusion that India is on its way to become a political and economic superpower. I therefore finally decided to formulate the headline of this article without a question mark.
India seeks more international influence and recognition
India is a country with many (changing) faces. I remember my first trips to India in the early 1990s when foreign influence on merchandise and service markets was almost absent. I could observe this with my own eyes. Today, India looks quite different, modern at many places but not everywhere. India’s GDP per capita is still very low and indeed visibly weak when getting around – but the middle class is at the same time expanding quickly and the number of dollar millionaires as well.
In other words: India needs good economic growth to move on further. And we know that economic growth is a function of productivity gains, hours worked and capital accumulation. Improvements in these areas are necessary and will happen in India. But how fast in a country that historically has been moving slowly?
The answer to this question depends to a high extent on India’s opening-up policy and attractiveness to foreign investors. In this respect, it seems plausible to be fairly optimistic, both due to China’s structural slowdown of economic growth and to president Trump’s confusing economic policy which obviously favors India with its balanced foreign policy and good growth potential. So chances of quite rapidly growing FDI in India on trend are quite good – despite disappointing numbers in the past few quarters.
Both Western politicians and business people rush currently to India more than ever to find out more about the opportunities that India may offer in the foreseeable future. Both the U.S. and the EU are looking for (attractive) trade agreements with India. Other countries such as the UK are trying to do so as well. India is diplomatically and politically already treated as a global superpower. And what about the economy in such a superpower context?
Prime Minister Narendra Modi’s comment on the issue above last fall summarized nicely India’s optimism about his country’s future: ”India is becoming a prime center of diversification and de-risking as a hub of global trade and manufacturing. Given this scenario, now is the opportune time for … companies to make in India, and make for the world” (October 2024 at the 18th Asia-Pacific Conference of German Businesses).
India receives more Western “sympathy points” than China
Economic growth of China has been slowing down quite dramatically in the past two decades, from double-digit increases to less than half whereas the GDP development of India was the other way around. In 2007, China’s GDP-growth rate was almost twice as high as India’s, 14.2 compared to 7.7 percent. The corresponding growth numbers in 2024 were 5.4 percent for China and about 6.4 percent for India (without discussing here the correctness of Chinese GDP statistics). On the other hand, China’s GDP per capita is still much higher than India’s.
Sure, the world knows that there is also a lot of technological progress in China. However, the world also knows about China’s economic imbalances which will mean an enormous burden many years ahead – such as the worrisome private and public debt situation (see Fromlet, 2025 https://blogg.lnu.se/china-research/?p=3615), massive government support to many SOEs, the hidden huge amounts of bad bank loans, the high (youth) unemployment and the demographic challenges – developments and trends that do not exist in India or to a more limited extent.
As far as India’s challenges are concerned, progress is particularly needed when it comes to infrastructure, education on a broad level and – impacting the first two examples – the insufficient public fiscal position. But public debt is obviously considered – right or wrong – as little growth-impeding by the global community outside India. And – irrationally – even more in the case of China.
All these impressions and interpretations have led me since some time ago to the conclusion that India – as I use to put it – nowadays gains more “Western sympathy points” than China does (even if markets should not underestimate China’s strategies for its technological future).
India’s potential GDP growth should remain higher than China’s
Officially calculated GDP growth and real or underlying GDP growth are historically not always the same in China, sometimes are official numbers too negative but mostly too positive. Currently, official Chinese growth objectives may be too optimistic for 2025 with announced +5 percent (which could end up at 3,5 percent in reality).
For India on the other hand, GDP growth could be as much as around 6 percent in both 2025 and 2026. Such an outlook should look promising to foreign business people. Particularly since these increases could be close to current potential GDP growth in both countries – according to my guess 3-3.5 percent in China and 6-6.5 percent in India. In the long run, potential GDP growth may be even higher than shown here for India – and lower for China. But this cannot be predicted today.
Of course, my potential growth assumptions are not more than “guestimates”. The results of China’s technological voyage cannot be foreseen today – and certainly not either India’s possible catching-up process with all its complicated details.
Despite these uncertainties, India has relatively good chances to become an economic superpower also globally which makes the country most probably even more interesting to many foreign companies in the years to come. Sure, China’s GDP per capita is still around five times higher than India’s but this relation indicates also that there still should exist considerable potential growth reserves in India – if reasonable politics remain in place!
India from a business perspective
Possible or planned commercial activities in an emerging market country like India urges certainly for a lot of careful (analytical) preparation. Even if India is more transparent than China, India is neither easy to analyze nor commercially easy to handle (see Fromlet 2024 https://blogg.lnu.se/china-research/?p=3501). Foreign business people should not underestimate these two challenges. They should also observe that India still applies too much protectionism as well – a matter of fact that is often forgotten.
Currently, India has to navigate in the changing global economy. The world is shifting alliances, supply chains and growth centers which makes India increasingly interesting to the global business community for FDI, sales and purchasing.
A number of competitive advantages could favor India’s corporate development substantially. The marketing of India as an attractive market for sales, sourcing and IT development is particularly based on
¤ India’s pretty good potential GDP growth ¤ the advantages of dealing with a democratic country and the rule of law ¤ the relative political and economic stability of the country ¤ the independent central bank ¤ institutional progress in different areas ¤ the enormous size of the country and the market ¤ the young average age of the working force (28 years, 45 years in Germany) ¤ what the Indians call a “vibrant society”.
Interesting areas for foreign business are according to many Indian sources among others: manufacturing, digitalization, (financial)services, infrastructure, education, etc.
Conclusion: Without doubt, India is currently more and more developing as the new superstar on the global political and economic horizon – certainly to some extent at the expense of China. But things should not be exaggerated. Consider, for example, the long-term tensions or conflicts with Pakistan. Careful market analysis is unavoidable, both in political, macroeconomic and microeconomic (corporate) terms. Pure herd behavior should be avoided – despite the promising growth potential that India indeed offers.
It should not be neglected that also India has its future political, social and economic challenges. Maybe democracy and India’s favorable demographic conditions will be the biggest competitive advantages of India in the long run.
Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
