Comparing the Economic Outlook for India and Brazil: How They Differ

India and Brazil are both multi-trillion-dollar economies and members of the oft-cited BRICS countries along with Russia, South Africa, and China. While both are among the most-watched emerging markets, the economic fortunes of Brazil and India appear to be on divergent paths. India will continue to gain ground on Brazil unless the South American country confronts difficult political and economic challenges.

Key Takeaways

  • India and Brazil are both important developing economies, part of the BRICS nations, with large populations and a wealth of natural resources.
  • While each has enormous potential, several limitations stand in the way of stable growth and prosperity for both countries.
  • India has a vibrant economy in the technology and service sectors; some of its limitations stem from regulatory inefficiencies, heavy financial burdens, and a large amount of poverty.
  • Brazil has an abundance of natural resources and a large workforce; however, its high inflation rate, corruption, and debt issues have hampered the nation's GDP growth.

India

India, a land of diversity and interesting opportunities remains high on the list of investment destinations by international investors and businesses. It is the world's largest democracy and boasts a vibrant economy in many areas including technology and the service sector.

With a lot of positives—a large population, stable government in the center, rising forex reserves, and high-value capital markets—India seems to be on a firm growth path with the potential of a double-digit growth rate.

However, regulatory inefficiencies, corruption, bureaucratic red tape in starting and running businesses, political pressures, and heavy financial burdens due to subsidies are some of the challenges facing India’s economy and business environment. While there is wealth in India, there is also still a large amount of poverty and inequality remains high.

Brazil

Brazil is South America's largest economy. The country has a lot going for it as it has an abundance of natural resources and people to fuel its workforce. Yet, as negative economic events have shown, having an abundance of these things does not necessarily mean strong incomes for citizens.

These resources must be appropriately managed and developed. Brazil has some of the fundamental components of what it takes to make its economy strong, but if it wants to truly improve the lives of its citizens then it will need to develop greater productivity and increase its international competitiveness. 

Brazil's economy has experienced some trouble. The country depends on its export-driven commodity trade, and China's slowing demand for these products is a lightning strike. On the upside, the trade war between China and the U.S. increased demand for Brazilian exports in agriculture and natural resources.

For investors in Brazil stocks, it's been a rollercoaster ride of ups and downs for some years. The iShares MSCI Brazil ETF, for example, fell 75% from a high in 2011 to a low in 2016. With government policies cracking down on corruption, the outlook for Brazilian companies improved and the ETF started to go back up in 2016. It was hit again in 2020 during the Covid pandemic and has not come close to reaching its pre-2016 levels as of 2023.

Comparing Economic Growth

Measured by aggregate gross domestic product (GDP), the Indian economy is larger than Brazil's. This is mostly because India's population, which is estimated at 1.34 billion in 2023, is significantly larger than Brazil's at an estimated 219 million. Measured on a per capita basis, however, Brazil is far richer. 

The estimated GDP per capita in Brazil was $8,917 in 2022, compared to India's $2,388 GDP per capita.

Greater exposure to international markets appears to drive India's growth. According to World Bank data, approximately 22.4% of India's GDP was generated from exports compared to 20% for Brazil in 2022. International markets and investors triggered an industrial revolution in India during the past few decades, allowing cheap Indian labor access to more than just agricultural careers.

Brazil, meanwhile, saw international trade shrink after the U.S. energy boom and a devaluation of the Chinese yuan. The United States and China are Brazil's two largest trading partners and major components of its recent economic structure.

Brazil's Scandals and Cronyism

Several high-profile scandals rocked Brazil between 2014 and early 2016. The most notable involved former president, Luiz Inácio Lula da Silva, along with dozens of other politicians and the semi-public energy company Petróleo Brasileiro SA. Known as Petrobras, it is perhaps the most important company in Brazil. A long investigation uncovered more than $2.1 billion in government kickbacks and bribes, which earned Petrobras lucrative contracts among other benefits.

Measured by market capitalization, Petrobras accounted for as much as 10% of the Brazilian economy in 2014. As of 2023, it accounts for approximately 5%. The scandal coincided with a global drop in commodity prices, which helped balloon fiscal deficits and job losses in Brazil.

The Brazilian economy cratered in the second half of 2015. Inflation remained a threat despite high interest rates and debt issues threatening the public and private sectors. By early 2016, the Brazilian Congress voted to impeach then-president Rousseff on charges of manipulating government accounting and she was forced out later in 2016.

Brazil's economy slowly began to recover in 2017 with 1.3% GDP growth with little improvement in 2018 at 1.8% growth due to a weak labor market, election uncertainty, and a trucker strike that halted economic activity in May 2019. There was a precipitous drop to -3.3% GDP growth in 2020 during the COVID-19 pandemic.

Since then, its economy has recovered slightly, with GDP growth of 5% in 2021 and 2.9% in 2022.

India's Pro-Business Transformation

For India to maintain its stride in productivity, the country needs to move from a rigid caste system and incorporate more efficient growth-oriented rules. Markets received a boost in 2014 with the election of Prime Minister Narendra Modi, a pro-business reformer. India's growth hit a multiyear high of 7.3% during his first year in office; however, efforts to simplify the country's complex and redundant tax code and make it easier to acquire or transfer land stalled in parliament.

In 2022, India was the world’s fifth-largest economy and could become a high-middle-income country by 2030. GDP growth in 2021 was 9.1% and in 2022 was 7%, both much higher than Brazil's growth. However, despite regulatory improvements to boost competitiveness, private investment and exports are at relatively low levels, which could slow long-term growth.

What Is India's Economy Ranked?

As of 2022, India is the world's fifth-largest economy, behind the U.S., China, Japan, and Germany. Its GDP in 2022 was $3.39 trillion.

What Is India's Main Contributor to GDP?

The services sector is the largest contributor to India's GDP, accounting for 47.51% of GDP as of 2021 (latest information). That is followed by industry and then agriculture.

What Is Brazil's Economy Known For?

Brazil has a key role in mining, being the leading producer of niobium, the second-largest producer of iron ore, and an important producer of tin and gold. The country also exports coffee and is one of the largest exporters of soybeans.

The Bottom Line

Both Brazil and India are two of the largest economies in the world that have seen strong growth in the past few decades. Both nations have tremendous opportunities to keep growing and entirely transforming their countries; these growth opportunities, however, do not come without challenges.

Both countries face their own unique challenges, from religion to population to corruption, and how they deal with them will determine their economic outcomes.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. The World Bank. "GDP (Current US$)."

  2. Investing.com. "India FX Reserves (USD)."

  3. U.S. Census Bureau. "India."

  4. Central Intelligence Agency. "The World Factbook: India."

  5. The World Bank. "GDP (Current USD$) - Latin America and Caribbean."

  6. World Integrated Trade Solution. "Brazil Exports to China in US$ Thousand 2015-2019."

  7. World Integrated Trade Solution. "Brazil Trade."

  8. Yahoo! Finance. "iShares MSCI Brazil ETF (EWZ)."

  9. The World Bank. "GDP (Current US$)."

  10. The World Bank. "GDP Per Capita (US$)."

  11. U.S. Census Bureau. "U.S. Census Bureau Current Population."

  12. The World Bank. "Exports of Goods and Services (% of GDP)."

  13. Reuters. "Brazil Prosecutors Say Petrobras Scheme Moved $2.1 Billion in Bribes."

  14. MacroTrends. "Petroleo Brasileiro S.A. - Petrobras Market Cap 2006 - 2023."

  15. Reuters. "Brazil's Rouseff Ousted by Senate, Temer Sworn In."

  16. The World Bank. "GDP Growth (Annual %) - Brazil."

  17. Statista. "India: Distribution of Gross Domestic Product (GDP) Across Economic Sectors From 2011 to 2021."

  18. European Parliament. "Brazil's Economy," Page 2.

Open a New Bank Account
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Sponsor
Name
Description