Events of the last few months have made clear the differences among the emerging economies. Commodity price hikes have hurt some and helped others. But more fundamentally, the break in global growth momentum has underscored significant policy differences among these economies. Even the leading lights of the emerging world, the famous BRIC economies—Brazil, Russia, India and China—seem to have gone in different directions. India and Brazil take the extremes, with the former disappointing and the latter seemingly going from strength to strength.

Of course, it has been a bad year for equity markets generally. As of mid-August, a simple average of the BRIC equity markets showed a year-to-date loss of almost 30%. The developed markets did only a little better. America's S&P 500 stock index had fallen about 13%. The European composite had dropped around 23%, and Japan's Nikkei stock index had lost some 14%.

By and large, all these setbacks reflected the same influences: the global economic slowdown; fears surrounding the credit crisis and inflation in general; and the seeming inability of economic policy to address the strains. Events also reminded investors of the special risks long associated with emerging markets. In Turkey, a major constitutional issue threatened the legitimacy of that country's elected government. And Russia offered its own special rendition of "Georgia on My Mind."

Even in the face of such generally disappointing performances, some economies, such as Brazil's, still give reason for optimism. Of course, the Brazilian economy, as a major exporter of minerals and agricultural products, has benefited tremendously from the run-up in commodity prices. And though agricultural prices have dropped some 10% from their February highs, they are still up enough in the past 12 months to give Brazil considerable momentum. But more than simply ride the crest of commodity prices, Brazil has done—and still is doing—much to secure its long-term economic future.

The country has, for instance, reached energy self-sufficiency, through the ethanol production of its mighty agricultural sector and prospectively from new oil discoveries in the South Atlantic. Brazil has also used its growth to invest significantly in its own long-term economic future. Capital spending on infrastructure, factories and equipment has surged by 15% in the last year alone, becoming the country's leading engine of economic growth. Strength and stability have earned Brazil an investment-grade rating in American and European financial markets, while the investment in long-term growth has proved an attractive inducement for foreign investment dollars to flow into the country—at a rate that so far has doubled last year's. Further encouraging the foreign flows is the strict, high interest-rate monetary policy that has kept Brazil's currency, the real, rising against the dollar.

In contrast, India's economy, a darling of the investment community a year ago, seems to have hit a wall and, in the process, revealed some of its more fundamental weaknesses. Growth has continued, but at a much slower pace. India's Federal Reserve Bank has adjusted its official real growth forecast down to 8% for this year—an expectation that most private forecasters describe as optimistic. More worrisome still is the surge in inflation, which has jumped to almost 12% over the past year.

India's Federal Reserve Bank has made efforts to get a handle on the situation by raising its main policy interest rate. But at 9%, it remains below the pace of inflation, suggesting that the central bank will have to do more. If the inflationary pressure persists, it will undermine the economy's cost advantage and the basis for its growth. Accordingly, foreign investment has recently reversed its direction and begun to flow out of India.

The immediate economic disappointments have highlighted still more problems. The choking bureaucracy and economic distortions, for which India was once infamous, remain too much in evidence to give complete confidence that the economy can overcome its self-imposed setbacks. Though India swept away a whole raft of economic distortions and crippling taxes in the late 1990s, it still finds itself burdened with subsidies and the government deficits they impose. The country, for instance, still heavily subsidizes fuel, a particularly difficult proposition since India imports some 75% of its oil. Some of those subsidies are scheduled to drop, with temporarily ill effects on the inflation front. But with 60% subsidies on diesel fuel, for instance, India has a long way to go to remove this distortion.

Agriculture is, if anything, even more heavily subsidized. The fertilizer subsidies alone amount to 2% of output. In addition to burdening taxpayers, such support has kept Indian agriculture highly inefficient, with rice yields one-third of China's and one-half of Vietnam's. Little wonder, then, that India at the recent Doha Round of free trade talks felt obliged to protect its farmers, even at the cost of shutting down those important negotiations. Largely because of India's many subsidies, and a recent, generous pay raise for civil servants, India's budget shortfall seems scheduled to rise to a high of 6.5% of its gross domestic product.