BRICS – Objectives, Significance, Challenges & Outcomes

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The 11th BRICS summit was concluded in November 2019 in a subdued manner. There weren’t any remarkable pronouncements and had largely gone unnoticed. Yet, BRICS meeting confirmed that the group thought as the challenger of the G7 group, was still together and taking efforts to build consensus for the future despite the current challenges faced by the member nations.

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What is BRICS?

  • Initially called BRIC, BRICS is the acronym coined to denote the five emerging economies – Brazil, Russia, India, China and South Africa. South Africa was the last to join the group in 2010.
  • The British Economist, Jim O’Neill, to describe the emerging economies – Brazil, Russia, India, and China, coined the term BRIC in 2001.
  • The Chairmanship of this grouping is rotated annually among the member countries according to the order of the acronym BRICS.
  • BRICS Leaders’ Summit is held annually.
  • The alliance was formalised in the course of the first meeting of the BRIC Foreign Ministers in 2006.
  • As of 2018, the total output was 23.2% of the world’s GDP.
  • It is the home for 41% of the global population in 2015.

Past notable outcomes:

  • The 6th BRICS Summit in Fortaleza, Brazil in 2014 saw the conclusion of the Fortaleza Declaration that led to the formation of the New Development Bank (NDB) and Contingency Reserve Arrangement.
  • The New Development Bank was set up in 2014 with all five BRICS nations contributing an equal share of economic capital and have equal voting rights, with no provision of veto power. It also intends to provide non-conditional financing, unlike the World Bank and the International Monetary Fund. Through this, the BRICS attempts to rectify the North-South divide that exists in the governance of the World Bank and the International Monetary Fund. As of now, it has approved 42 investment projects worth $11 million.
  • Contingency Reserve Arrangement aimed to ensure liquidity for members where they are faced with short-term balance of payment problems. The $100 billion capital committed under the CRA can act as a security for the BRICS financial stability during times of crisis.

Why the global community needs BRICS?

  • BRICS consists of new and emerging economies, making it diverse and all-inclusive. This would prevent the repetition of the 2008 global financial crisis and provide security against new threats like the trade war and unilateral sanctions.
  • The increasing contribution of the BRICS nations to the global economy and the growing importance of the economic interactions between these nations and other Emerging Market and Developing Countries (EMDCs) provides for the change from the Western-centric economic and political decisions.
  • It ensures the inclusion of all emerging economies instead of only the developed countries.
  • Countering current trends: It provides for significant contribution to global security as it advocates for multilateralism, globalisation and polycentric world order while opposing the current dangerous trends of unilateralism and protectionism.
  • Representation of the developing nations: The western nations, through their policy of protectionism and other economic policies, are increasing the difference between the rich and the poor and the trade war between the US and China is worsening the situation. The developing nations are facing the consequence of these policies. The BRICS forum is a necessary tool to represent these nations.

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Why is it important for India?

  • Geopolitical balance: In recent years, there are growing differences between the developed nations, especially the US and the Russia-China alliance. This situation is especially difficult for India to maintain a strategic balance between its own strategic interests while maintaining a cordial relationship with all the nations. Therefore, BRICS gives India the opportunity to maintain its strategic interests in the international arena.
  • Reforming financial international institutions is one of the main objectives of the BRICS alliance. This is to make these institutions more just and inclusive. Furthermore, the member nations play a crucial role in the G20 forum and thus, a closer relationship between these nations can ensure the necessary changes in the world order.
  • Terrorism: BRICS provides India with the platform to advocate its stance on “zero tolerance for terrorism” by bringing specific aspects pertaining to terrorism.
  • UNSC reforms: India, in recent years, has been calling for reform in the UN Security Council so that there is an equal representation across the globe. It is also aspiring to become one of the permanent members of this prestigious forum. However, China is hindering these efforts. Therefore, BRICS would provide for greater interactions with China while also getting support from other developing nations.

The 11th BRICS Summit:

  • The 11th BRICS Summit had taken place from 13th to 14th November 2019 in Brasilia, Brazil.
  • The theme of this year’s BRICS Summit was “Economic Growth for an Innovative Future”

What were the outcomes?

The 11th BRICS summit concluded in Brazil with the customary calls for strengthening multilateralism and the need for reform of the international organisations on par with the current trends.

Brasilia Declaration:

  • It advocates multilateralism, the importance of the UN in international affairs and international law.
  • It also called for the restructuring of the UN and other multilateral organisations like the World Bank, WTO and the International Monetary Fund (IMF) so that they can address the current challenges in the global economy.

What are the key conclusions from India’s perspective?

  • In India’s perspective, two major development had taken place in the summit:
  1. Grouping decided to open the regional office of NDB in India. This may give impetus to the financing of projects in India’s priority areas.
  2. Terrorism was one of the priority areas of this summit. The BRICS joint working group on counter-terrorism decided to constitute five sub-working groups, one each for focusing on terrorist financing, use of the internet for terrorist purposes, countering radicalisation, the issue of foreign terrorist fighters and capacity building.

Sideline meetings:

India-Brazil:

  • President of Brazil was invited as the Chief Guest for India’s 2020 Republic Day.
  • Brazil had announced that it would grant visa-free travel for the Indian citizens.

India-China:

  • The Chinese President Xi had invited PM Modi for the 3rd Informal summit that is going to be held in China in 2020.
  • Both the nations, during the talks, had reviewed the preparation for celebrating the 70th anniversary of the formal establishment of diplomatic relations between the two nations in 2020.

India-Russia:

  • The 1st Bilateral Regional Forum at the level of Russian Provinces and the Indian states will be held next year.
  • India was invited to invest in the Arctic The USD 25 billion target of bilateral trade by 2025 has already been achieved.

What are the challenges faced by BRICS?

  • Despite completing a decade of this grouping, it continues to face the challenges due to the lack of binding ideology, bilateral differences, diversity in terms of social, cultural and political systems and China’s current dominance of the global economy, which reduces the space for other countries to grow in the grouping.
  • Kindleberger Trap: In domestic politics, the governments produce public goods like policing and a clean environment. In global politics, public goods like stable climate, financial stability, freedom of seas, etc. are given by the coalition led by the largest powers since the small powers have little incentive to provide them, as their contribution makes no difference. The largest powers, however, can see the effect and benefit of their contribution. However, when they become weak like during the post-World War I era when Britain was too weak and the isolationist US not willing to provide the public goods led to the devastating result – World War II. This is called the Kindleberger Trap. As China rises and challenges US’ hegemony there is a growing discussion about the Kindleberger trap – a situation wherein China fails to provide global public goods like a clean environment and financial stability. This idea is even applicable to India since it too is aspiring for the same position.
  • China-factor: India’s efforts to seek changes in international financial governance through BRICS have successful because China also shares the same objective. However, India’s other aspirations like UNSC reform, counter-terrorism, and fight against climate change are facing challenges because China is not on board.
  • Selective negotiations: Though UNSC reform is one of the main objectives of the BRICS summit, it has currently become more declaratory as China is the only permanent member to oppose it. This shows the BRICS is interested in cooperating in only selective aspects, based on the selfish aspirations of the few.
  • Climate Change has a lot of potentials to bring these member nations to a common ground since it is a mutual threat. Yet, this too does not seem to make any difference, as Russia is ambivalent. India has taken incentives outside the grouping to project itself as a leader in the fight against climate change like the launch of the International Solar Alliance in 2015 and not making use of BRICS due to the growing differences.
  • Regional Problems: All the five-member nations are facing their own domestic problems. The US’ trade war and unpredictable sanctions are not allowing these economies to see their full potential.
  • Contradictory Actions: India had recently pulled out of the RCEP Free Trade Agreement due to the pressure from the domestic producers, as it would open the floodgates for Chinese goods to India. India and China had condemned protectionism even though both have resorted to it when pushed to the wall. All five countries must be economically stronger in the future to be able to be in charge of the significant changes in the global economy.

What can be the way forward?

  • The GDP growth of the BRICS has largely been propelled by India and China. Even during the 2008-09 crises, these two countries were in bright spots globally.
  • However, since 2014, there is an apparent downturn in the BRICS economies, though India had started experiencing it only in the past two years. Countries like Brazil and Russia have even shown negative growth during this period.
  • Trade war and protectionism are bound to decelerate the BRICS economies in the next few years if the current situation does not change.
  • BRICS must look beyond the intermittent, standard negotiations and work together to facilitate concrete trade and investment mechanism within the grouping.
  • The New Development Bank should spread itself across its member states – both in terms of the financial proposals undertaken and its physical presence. It should become the key pivotal financial institution facilitating sustained business within BRICS. Also, the success of the NDB should be used to create other such institutions for further development of the BRICS nations.
  • Common aspirations must be recognised and prioritized while putting aside insignificant differences like ideologies. The shared aspirations of these nations include the promotion of trade and investment, respecting the sovereignty and democratic decision making while promoting multilateralism.
  • While the West is inclining towards protectionism, it is a good opportunity for the BRICS nations to embrace globalisation. Cooperation is vital for all the member nations in the aspects of trade and investments to stop their economies from further declining.
  • The BRICS nations constitute 13.24% of the World Bank voting power and 14.91% of the IMF quota shares. This can be used to their advantage, to promote the change they aspire.
  • The member nations will also nearly account for 50% of the world’s economic growth in 2020. The advantages of the Fourth Industrial Revolution can be used for furthering the economic growth of these countries through cooperation in the areas of innovations, digital economy, and Artificial Intelligence and re-skilling of their population.
  • Intra-BRICS collaborations: It is necessary to increase the FDI flows by simplifying the intra-BRICS business that will increase mutual trade and investment. There is also the need for identifying the priority areas for the next ten years and creating a blueprint for easier intra-BRICS collaborations.
  • Making use of the existing assets present within the member countries like raw materials, natural resources, high-end technologies, and large consumer market. China should especially open its markets so that its economy can compete again. It should also allow other smaller nations to industrialise and grow so that they too can contribute to the global economy.

Conclusion

BRICS is a critical platform that can ensure the necessary reforms in the existing international organisations and also solve the crisis in the international area. Putting aside the trivial differences can ensure common the development of all the BRICS nations.

Test yourself

Critically analyse the measures that can be taken by the member nations to make use of the potential of BRICS. (250 words)

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