By Sohini Ghosh:
The past week went in a whirlwind of the much discussed and debated conference of BRICS (an acronym for Brazil, Russia, India, China and South Africa) held in Brazil. While we are yet to receive an official statement from the PMO which leaves us all lurching in a sense of ambiguity as to what to think about it, but there has been no dearth of active and passive news making the rounds as to the positives and negatives of it.
Getting down to the basics primarily, BRICS cumulatively represent one-fifth of the global economy where the countries that happen to be part of BRICS, have rather glaring differences. They remain united by perhaps the only common thread wherein all were experiencing radical shifts in their economic growth at the time of conception. The other common goal that probably unites them at present is to reduce or eliminate dependency on the American dollar by introducing trading in Chinese or Russian currencies. This however seems like a far-fetched goal presently as despite the trading currency, the reserve currency would continue to be the one which succeeds in gaining a stronger hold over the greater part of the global market, which happens to be the USD at present and stands a good chance to remain so for quite some time. Ultimately, irrespective of the currency you trade with, the trading currency shall be converted to the currency that can sustain globally, to form the reserve currency.
The five member nations, despite a common goal, are poles apart in all other aspects. There is a huge population disparity, with China and India forming 1.36 and 1.25 billion people respectively while, Brazil with 200 million, Russia with 114 million and South Africa stands at 53 million.
While South Africa and India have an emerging trend for their GDP growth, China and Brazil remain stagnated going by the growth marked in 2013 and as predicted for 2014 while Russia is recovering in 2014 from its low of 2013. India, Brazil and South Africa, while being functional democracies, differ from the Russian oligarchy and Chinese communism.
The big question that looms is – how India hopes to gain from such an alliance of co-dependency? Truth be told and if reflected upon, perhaps not much. The major bone of contention being China. Yes of course the set-up of a $100 Billion BRICS Development Bank (with China investing upto $41 billion while South Africa investing $5 billion and the rest three nations with $ 18 billion each.) along with a reserve currency pool worth over another $100 billion in China makes us optimistic, but if we delve deeper we are met with the not-so flattering logistics and politics involved. China with a current GDP of $9.25 trillion which is near about 1.4 times the combined GDP of the other 4 nations (with South Africa at a measly low GDP of $0.35 trillion), it would be safe to say that they would inevitably play a far superior role when it comes to extending loans and trading despite being represented as an equal stakeholder on paper, a structurally similar relationship as one can observe between USA and the World Bank where USA continues to pull the strings. South Africa too stands to be exploited, especially their labour and natural resources, as has been the case in the past often deteriorating their production. China and India continues to share a tumultuous unresolved relationship with its border disputes and China’s close association with Pakistan, a country India shares a troublesome past, unstable present and perhaps a questionable future with irreconcilable differences.
Does setting up of the BRICS Development Bank imply complete uncoupling from IMF for India? Maybe. Or maybe not. As the statement released enunciated on the disappointment these member nations were subjected to while dealing with IMF: “We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness” and further reinstated the positives of setting up the Development Bank at Shanghai, what it truly and effectively implied, especially for India, is an alternative source to develop and finance her trading as that is the major sector that she is looking at currently, to develop right now in terms of multilateral alliances. This doesn’t necessarily mean that they would discontinue their dependency on IMF but perhaps simply lessen to quite an appreciable extent. However, a likely positive of the Development Bank would be to help meet short term balance of payment pressures.
While India focussed on developing deeper ties with Russia during this meet, possibly because of greater focus on defence, nuclear and energy sectors for this term and Russia being one of the top providers for the same with an economy sustained majorly by catering to the exports of the above mentioned sectors, India stands a good chance bilaterally if not otherwise to gain from this alliance. As PM Narendra Modi himself quoted to the Russian President Putin “Even a child in India, if asked who India’s best friend is, will reply it is Russia because Russia has been with India in times of crisis…”
The ulterior motive of China to control and bend according to its own needs by taking a clairvoyant grip over the bank was evident when negotiations were underway to create an equal power sharing strategy as China argued vehemently that the control be in proportion to the economic growth of a country. It would be foolhardy thus to assume that they wouldn’t push for the same further down the road despite the terms being clear. It is after all hard to let go of the authoritarian ways one is used to.
While China frolics in a phase marked by sporadic growth, Brazil, India and Russia are at a crossroad where they are looking to spend their revenue massively in projects of infrastructure quite specifically. Objectively speaking of India, with its own share of domestic turmoil and the economic mess of a meltdown it stares into right now, it is highly improbable they are at a position to lend significantly to other countries or sustain the positive growth incline for other emerging and developing nations or to the development bank at present and the near future. South Africa looks at a tough road ahead right now with an economy disparately down that needs to be resuscitated as soon as possible with diverse investments. It has been marked off late with an emerging economy but it is unarguably the weakest link of BRICS. Surprisingly enough, China has been a key player in Africa and Latin America spending rather generously, well enabled by the powerful China Development Bank. Coincidence? Maybe not.
BRICS, though aims to be on a path marked by strong sustainable and equitable growth, however, if looked at the intricacies, it is quite easy to conclude that the road to perdition won’t be a far-fetched idea. It is perhaps a matter of time before they disintegrate or erupt into disputes as they remain unified solely by the delicate thread of being ambitiously anti-US funding and defying the cyclic control system fed by the World Bank and IMF. Albeit there is that optimistic scenario we can consider wherein the differences melt quite smoothly while blending in and unanimously reaching a consensus, but that is easier said than done. The presidency of the World Bank gives India a rather pseudo-sense of power which effectively wouldn’t further our agendas in the long run. But it is a step forward to bring about a paradigm shift and the wiser option would be to carefully observe as to how these diplomatic relations chalks out while carefully navigating through the Chinese hegemony.