Let us have a brief idea about the history of reforms in the BRIC countries.

Brazil
Post the World War II, Brazils economy was liberalized. However, the over-valued foreignexchange rate combined with the high inflation and repressed demand led to increase in the imports and sluggish performance of exports. This resulted in a Balance of Payment crisis. In the second half of 1950s, the government enacted a slew of reforms promoting import substitution industry through which the Brazilian economy experienced a rapid growth and diversification. The average annual rate of GDP exceeded 7% in the period 1950-1961. But heavy industrialization resulted in substantial increase in the imports of machineries and the large foreign capital injection in this period increased the foreign debt. Thus, the import substitution industrialization increased the BOP instead of reducing it. Due to and economic and political crisis in period 1962-1967, Brazil faced a stagnation. The post 1964 reforms of the military government created a favorable environment for rapid growth in the period 1968 - 1973 and the economy recorded a double digit growth. The 1973 oil shock caused the import bills to rise sharply. But Brazil opted for a high growth path by renewed strategies of import substitution industrialization, the idea being that the import substitution and export expansion would result in trade surpluses which could be used to repay the foreign debt. Brazil was able to raise its debts through petrodollars which were in abundance in the financial system. It sustained an annual average GDP growth rate of 6.9% in a period of world recession where the economies were adjusting to the oil shock. The second oil shock in 1979, however, doubled the price of imported oil to Brazil. The increase in international interest rates sharply increased the BOP again and the Mexican debt crisis ended Brazils easy access to the financial system. The period 1980 1993 was marked by stagflation. The 1994 stabilization plan Plano Real brought Brazil back on growth track.

Russia
From 1991-1992 the credit expansion took place in Russia after the breakdown of the Soviet Union and it was running a budget deficit of about 20% of GDP. This led to hyperinflation which is signified by inflation of 2000%. Post this episode fiscal and monetary prudence was observed. By the end of 1997 Russia experienced progress; the currency was stabilized along with privatization. In 1998 Russia experienced a downturn as it was able to implement key fiscal

reforms resulting in an exodus of foreign investors. Post this Russia grew at an encouraging rate of around 7%. Russia was insulated from the 2008 crisis because of the strong anti-crisis measures taken by the government where it grew by about 4.5%. But as an after effect of the housing crisis of 2008, oil prices went down from $140 per barrel to $40 per barrel. This caused a severe reduction in the oil export income of Russia causing its GDP to reduce by 7% in 2009.

India
Prior 1991, India was a closed economy which did not entertain foreign companies and investments. The thinking was that the foreign companies will hinder the growth of the local enterprises. But the government soon realized that this model of restraint will not be able to satisfy the demands of the growing population. In 1991, India faced a balance of payment crisis where India could not meet short term obligations. So as a guarantee to receive the bailout from the IMF, India had to enact structural economic reforms. The reforms included: a. Opening for international trade b. Privatization c. Inflation control measures d. Tax reform e. De-Regularization With this liberalization came the growth of the country and with it higher returns for foreign investor. This was the first wave of interaction of developed countries and India, a developing country. These reforms continued with the NDA government with disinvestment of non performing companies like Maruti Suzuki, and VSNL. In 2012 the Manmohan Singh led UPA government further encouraged foreign investment by increasing the FDI cap from various sectors like Aviation, multi-brand retail etc.

China
Reforms in China started from 1978 by Deng Xiaoping by reforming the agricultural sector. Slowly private enterprises where encouraged over the years along with decentralization and by 1992 the GDP of the private sector surpassed that of the public sector. Between 2001 and 2004

tariffs trade barriers and regulations were reduced. Moreover China also entered the World Trade Organization in this period. China has been the driving force of growth in Asia.

South Africa
Although South Africa gained independence from the British Rule in 1931, Apartheid divided the society into privileged white society and an impoverished black society. The period 19311993 was plagued by this legalised discrimination which resulted in the whites which formed 20% of South African population owning 90% of the land in the country. Finally in 1992 under the increasing local and international opposition to apartheid in the 1980s which included an armed struggle, civil unrest, economic and cultural sanctions by the international community, and pressure arising from the anti-apartheid movement around the world, a referendum was held where the white electorates voted 68% in favor of dismantling the apartheid. Due to this instability and macroeconomic imbalances, South Africa failed to attract substantial FDIs. Though post 1994, FDI added modestly to the capital formation, the high rates of crime, labour regulations, shortage of skills and less competitive tax structure. The government launched a comprehensive industrial strategy to promote investment in an environment of macroeconomic stability. This included initiatives to address the skills shortage in South Africa and implement the free trade agreements with the European Union and other Southern African Development Community (SADC) members. The FDI inflow to the country started increasing as the GDP growth rate improved and South Africa became one of the fastest growing economy in the post 2000 era.