In 2001, leading investment bank, Goldman Sachs Group Inc. (GS) coined the famous term BRIC referring to the emerging economies of Brazil, Russia, India, China who were bound to take centre stage in the world economy in the next two-three decades. South Africa was the latest inclusion in 2010 and thus BRICS are distinguished by their large, fast growing economies and significant influence on global affairs.
The five nations constituting 44% of the world population contributes 40% in global GDP and make up 18% of world trade. All five are also part of G20 nations. The achievements can be acknowledged majorly in the economic field with establishment of a global financial institution, New Development Bank, to rival the western dominated IMF and the World Bank, and have managed to pool US$100 billion.
The Contingency Reserve Fund to provide protection against global liquidity pressures, Export Credit Insurance to encourage international trade between BRICS countries, Financing for Innovation Fund to facilitate joint innovation projects and new proposals for Customs Cooperation and Reinsurance Pool, BRICS Friendly City Conclave are some other feathers in their cap.
These nations were predicted to topple leading economies including a few in the G7 group. But, contrary to expectations, 4 out of 5 countries are in shambles with fear of recession looming large. Failure to quickly diversify gains earned during good times from one sector to another is one of the main reason Brazil and Russia are in financial distress. These nations are also grappling with geo political problems, government instability and challenges in implementing much needed reforms.
The crude oil which worked out to be a benefactor for India played a spoiler in Brazil and Russia. Scandals and crisis threaten Brazil into worst economic situation in 25 years that is being perceived as imminent recession (growth rate: -3.5%). Double digit inflation and political instability are adding to its economic woes. The oil dependant Russian economy is failing due to falling oil prices and imposed international sanctions due to Ukranian crisis. Russian Ruble had a free fall being the worst performing currency in recent times. High inflation (8.4%) and negative GDP growth are contributing to its miseries.
China moves ahead with structural changes in the economy. It aims to be an economy driven by domestic consumption and services sector rather than low cost export driven manufacturing sector. The transition may take long and global economy will keep experiencing its after effects particularly after recent devaluation of Yuan.
South Africa too faces its part of leadership crisis. Also, due to corruption at high levels, insignificant economy and GDP compared to other members, rising labor cost and income inequalities, efficacy of BRICS, IBSA and BASIC have become precarious.
India remains the only exception among BRICS nations. It is currently the world's fastest growing economy as it has managed to attract new investment and continues to maintain a positive business atmosphere with consistent growth rate. It remains a net importer of commodities and its growth is more inclined towards services owing to a large demographic dividend with little dependence on commodity exports.
With Indian leadership at New Development Bank, BRICS should be an integral part of India's grand strategy which can wade its journey from "norm taker" to "norm shaper". The bloc offers India's greater bargaining space as India seeks to gain greater prominence in institutions of global governance. Actions taken by India in its own developmental interests have the unintended consequence of strengthening the plurilateral economic agenda.
India should not hesitate to join or create other BRICS initiatives that may have strategic implications for global trade, finance, cyber space and large ecosystems. Since, it does not strive to create disruptive norms, India is the best bet the international community has to "sling shot" past the illiberal impulses in geopolitics. The Atlantic powers need to recognize India's role within BRICS is a bulwark against such impulses and encourage its leadership in plurilateral forums.
- Neda Fatima