India and Brazil are both multi-trillion-dollar economies and members of the oft-cited BRIC countries along with Russia 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 should continue to gain ground on Brazil, unless the South American country confronts difficult political and economic challenges.

Comparing Economic Growth

Measured by aggregate gross domestic product (GDP), the Indian economy is larger than Brazil's, according to This is mostly because India's population, which reached 1.34 billion in 2015, is significantly larger than Brazil's at 210 million as of 2018. Measured on a per capita basis, however, Brazil is far richer. The estimated GDP per capita in Brazil was $10,034 in 2017, roughly five times larger than India's at $1,941 GDP per capita. 

Greater exposure to international markets appears to drive India's growth. According to World Bank data, approximately 19% of India's GDP was generated from exports compared to only 12.5% for Brazil in 2017. International markets and investors triggered an industrial revolution in India during recent 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 (NYSE: PBR). 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. 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 threaten the public and private sector. By early 2016, the Brazilian Congress voted to impeach 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% GDP growth and the same expected for 2018 due to a weak labor market, election uncertainty, and a trucker strike that halted economic activity in May 2018.

India's Pro-business Transformation

India entered 2016 with by far the lowest output per person among BRIC countries. Still, India's GDP per capita was roughly equivalent to Brazil's in 1985, Russia's in 2000 and China's in 2004. Each of those countries experienced more than a decade of strong growth in subsequent years, particularly after liberalizing markets. India has the chance to make similar strides, and it continues to be a bright spot in the struggling emerging market landscape.

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 2018, India is the world’s third largest economy and could become a high-middle income country by 2030. Long-term GDP growth is stable, and India is expected to grow at over 7% per year. However, despite regulatory improvements to boost competitiveness, private investment and exports are at relatively low levels, which could slow long-term growth.