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India and BRICS

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India and BRICS Changes and challenges for the world's five fastest emerging economies

Pranay Sharma

/ 8 Minuten zu lesen

Die Regierungschefs der 5 BRICS-Staaten bei einem Treffen in Mexico im Juni 2012. (© picture-alliance/dpa)

Last year, a leading international weekly had an interesting cartoon for a story on BRICS. It showed, China sprinting ahead on a running track, while the other members – India, Russia, Brazil and South Africa – panting and out of breath, struggling behind to catch up with the leader. Despite its exaggeration, the cartoon highlighted a moot question that many have had about BRICS. Can the grouping of what is touted as the world's fastest emerging economies be cohesive when a wide gap exists between its leading member and the rest? And of late, another question has also begun to pop up: Has BRICS run out of puff after the global economic slowdown?

Both questions would seem relevant to a large number of people. With its fast paced economic growth BRICS not only managed to catch the imagination of the world. It often flaunted its potential strength to take on established world bodies and financial institutions. But since the global economic slowdown the BRICS economies seem to be floundering. China's double digit growth for decades has come down to seven percent. India's nine percent growth in the past years is now down to five, while the economies of the other members have gone even below that mark. It, therefore, seems justified when some people ask whether the success story of the BRICS group was made up of only hype and fluff.

From the drawing board of Goldman Sachs

To a large extent the success story of these economies originated from the drawing board of Goldman Sachs. In 2005, one of the executives of the investment bank came out with a report and coined the term BRIC, clubbing together Brazil, Russia, India and China. It highlighted not only their impressive economic growth but also their potential to contribute to the global economy. The idea gelled with the political leadership of these countries. Subsequently, the foreign ministers of the four countries met on the sidelines of the United Nations General Assembly in 2006 to discuss a tentative programme to work together. This continued for the next few years till in 2009 the heads of government of BRIC held their first Summit meeting in St. Petersburg. The next year it decided to include South Africa and thus became BRICS.

The formal coming together of the group forced the world to sit back and take note of it. For despite their apparent disparities, BRICS had much to offer. Together the five countries accounted for nearly three billion people and had a combined nominal GDP of over 16 trillion US dollars (11,6 trillion Euros). Their combined foreign reserve was more than 4 trillion US dollars (2,9 trillion Euros) and the economies of the BRICS members were growing at seven percent or more each year at that time. Their respective geographical positions – spanning four continents – also allowed them to spread their network to large parts of the world. As an acknowledgement of their phenomenal growth all five of them were made part of the G-20, the premier forum to discuss and debate major challenges to the global economy.

But despite the commonalities, the BRICS states have some major disparities that raise questions about its sustainability. Brazil and Russia are major producers of oil and gas, while South Africa has huge coal deposits. However, India and China, on the other hand are energy-deficient countries seeking sources for oil, gas and coal in different parts of the world to fuel their respective development and growth. Yet, another difference is the distribution of population among the five members. India (1.2 billion) and China (1.37 billion) add up to over 2.5 billion people. The combined population of Russia (143 million), Brazil (198 million) and South Africa (51 million) is less than 400 million.

Even in their political structure, the five countries are different. India, Brazil and South Africa are democracies, while China and Russia are ruled either by one party with hardly any room for opposition or dissenting voice. Moreover, Russia and China are both permanent members of the United Nations Security Council and wield veto-powers. While, India, Brazil and South Africa are all aspirants who want permanent membership in the highest decision making body of the world.

So why has India joined BRICS and what does it seek from it?

"Triple C" – A forum for consultation, cooperation and coordination

India's approach to BRICS has to be seen in the larger context of the existing world scenario and policies pursued by Delhi to maintain its own growth and development. Like many other developing nations, India's top-priority is to transform its own society.

Its economic growth for the past decade or so notwithstanding, India still has about 300 to 400 million people of its population who are poor. It has been the aim of successive governments to pull large numbers of people out of poverty and make them stake-holders in the country's growth and development. Indian leaders are mindful of the fact that rising poverty and a widening wealth gap can lead to social unrest and disquiet among its populace. This in turn can create serious social tensions within the country; bring the various fissures to the fore and lead to violence, chaos and political instability.

Starting from a very poor base of social development when in August 1947 it emerged as an independent nation, India has been striving to take decisions to make its wealth distribution more equitable. For over four decades since independence, India pursued a socialist-oriented and government-controlled economy. But since the end of the cold-war, it opened up its markets and embarked on a liberalized economy. India has since offered to present itself as an attractive destination and market for foreign investment and goods.

To do so, India has been trying to expand its options. It has deepened its engagement with a wide range of economic groups and blocs in Asia and elsewhere in the world. While it has joined BRICS, it also engages with Brazil and South Africa in IBSA (India, Brazil and South Africa). With Russia and China it meets regularly in the RIC (Russia, India and China). In addition, it also meets key members like Russia and China at regular bilateral summits.

Indian officials describe BRICS as "Triple C", a forum that provides the opportunity for consultation, cooperation and coordination among its members on a wide range of issues that affect them. Seeking global governance, both at the financial as well at the political level India wants to reform the important institutions such as International Monetary Fund (IMF), World Bank and UN Security Council, so that they reflect the changed ground reality.

China's predominance is a cause for bother

But China seems to be the elephant in the room. Its economy is four times bigger than that of India, Russia and Brazil and nearly 20 times more than that of South Africa. But India and others within BRICS argue that the difference in the size of respective economies cannot be a deterrent to keep them apart. The member countries agree with each other and share common problems on a number of other key areas such as climate change and having greater say in major bodies and financial institutions, like IMF, World Bank and World Trade Organisation.

But such homilies aside, there is no denying that China's predominance is a cause for bother for India and the others in BRICS. China is the biggest trading partner for most other members in the group, but this has not prevented them from filing maximum number of anti-dumping and other trade violation charges against China at world dispute mechanism bodies.

The proposed BRICS Development Bank with an initial kitty of 80 billion US dollar (58 billion Euros) was seen as an alternative to the World Bank where the voices of the emerging economies are drowned by the US and the European countries. But the helping hand that the proposed bank is likely to offer for sustained and development-oriented growth in the developing world is yet to be finalized. Despite several rounds of discussions and lengthy meetings, the members have not been able to come to an understanding on the banks location, the members in its board and the vote share that will guide the decision making and identify areas or projects for future investments. Indian officials involved in the discussions claim that much of the differences have been ironed out and at a meeting of the political leadership at the BRICS Summit in Brazil later in 2014 the Development Bank will be formally launched.

But this raises another important question whether the BRICS has become yet another forum where the Sino-Indian rivalry will be further sharpened. Or will it allow the two countries more opportunities to engage and draw up an action plan with the others to meet some of their common challenges. There are many in the Indian establishment who believe that China's growth is not such bad news for India or other members of BRICS. They point out that as long as China grows, there will be no dearth for investment. And, India obviously fancies itself as an attractive investment for China.

India has the opportunity to make the most of BRICS

Despite occasional hiccups, the leaderships in India and China have managed to engage with each other in a more cooperative relationship in the past decade. It is true that it has not been the easiest of relationship for India to conduct in its foreign policy. The two giants of Asia, occupying the same geographical space have brushed against each other at times during their simultaneous rise. But the leaders in both Delhi and Beijing have ensured that such occasions did not snowball into any major controversy to strain their bilateral ties.

The competitiveness between the two countries can lead to rivalry for dominance. Moreover, the long boundary they share with each other is disputed and has not yet been settled. In 1962, the boundary dispute led the two countries to war. But since then they have largely managed to maintain peace and tranquillity along their borders. While they engage each other to find a mutually, acceptable formula to resolve the outstanding boundary dispute, the two countries have not stopped from expanding their cooperation in other areas.

Trade is one such area which has risen to more than 80 billion US dollars (58 billion Euros) from a few millions less than a decade ago. There is scope to expand it further. Moreover, with large number of their population below the poverty line, both countries want peace not only with each other but also in their neighbourhood so that their economic development and growth remains unhindered.

In addition, the United States' refocus and decision to make Asia the pivot of its security policy has been seen with trepidation in China. The leadership in Beijing knows that ultimately, it is the US that it will be contesting for global dominance. For the same reason, the growing ties between India and the US and other American allies in Asia, has also kept China guessing. If not as a partner, it would like India to adopt a neutral and equidistant position vis-à-vis China and the US. Therefore, it needs India's cooperation in forums like BRICS.

From India's point of view this is the ideal situation. It has developed good relations with the European countries as well as the US and its allies in Asia. On the other hand, it has also been improving and developing ties with China. A forum like BRICS not only gives it the opportunity to engage further with China and make 'common cause' on areas of concern and mutual benefit. It also provides India with the opportunity of deepening and strengthening its ties with the other members like Russia, Brazil and South Africa.

China will continue to evoke both awe and admiration in the BRICS group as it does in most other parts of the world. For a country that is seen as a much benign force than China, India has the ideal opportunity of making the most of BRICS. By all indication, India will continue to be an active member and thrive in BRICS.

is a Delhi based commentator on political and foreign affairs related issues. He is currently Senior Editor of Outlook magazine.