The fanfare with which Brazil, Russia, India, China and South Africa had come together to form the forum called BRICS is somehow now fading. Not just that it is also giving way to despondency though efforts are on to get the BRICS back to the tracks. Shankar Kumar traces reasons behind this waywardness of an otherwise meaningful grouping of nations
BRICS preparatory meetings are on. The group’s finance ministers and central bank governors have just concluded their meeting on the sidelines of the Annual Spring gathering of the International Monetary Fund and the World Bank in Washington DC. Among the various issues, efficacy of the establishment of New Development Bank and planned setting up of the group’s rating agency came up for the discussion during the meeting. Working groups of several committees formed under the aegis of BRICS are also engaged in deliberations. Outcome of all these meetings and consultations will be put before the leaders at the summit to be held on October 16-17 in Goa.
But there is a marked weariness among experts with regard to BRICS’ effectiveness as a powerful group of five emerging economies.
Except India the rest of the members of the group are grappling with either domestic or economic problems. Dilma Rousseff, the Brazilian President, is on the verge of getting impeached by her country’s parliament. She is accused of mismanagement of the country’s economy, currently in freefall. Brazil’s national unemployment rate has risen from 6.7 percent in mid-2014 to 9.5 percent at the end of 2015. The budget deficit, which was running two to three percent of GDP, has ballooned to 10 percent last year. Inflation has reached nearly 11 percent while GDP has shrunk by 2.67 percent and ‘Real’ (Brazilian currency) has dropped 0.1 percent to 3.8734 per dollar. Political observers say that even if new President is elected, there is no guarantee Brazil will recover from its economic mess in the next two to three years.
Almost a similar situation prevails in South Africa. Although, President Jacob Zuma has survived impeachment, but political crisis is not over in the country where opposition parties have rallied against him over the issue of corruption. He is accused of spending more than $16 million public money to renovate his private residence. All this is happening amid the country’s struggling economy which is expected to grow by 0.9 percent instead of 1.7 percent as predicted earlier. Already facing poverty and unemployment, the South African currency, “Rand” has halved over the past five year. One Rand is worth around $0.0639 US dollar.
Russia is also struggling to recover from continuing economic recession. Down under international sanctions, Russia’s liquid foreign money fell by $5.4 billion to $369.2 billion. Worldwide drops in oil prices have also hit the country hard. International sanctions and declining oil prices have contributed to Russian economy shrink by 3.7 percent, making it one of the world’s 10 worst performing emerging economy in 2015. The IMF has predicted a further contraction of about 1 percent in 2016. Already scalded by the leaked ‘Panama Papers’, Russian President Vladimir Putin has slashed his government’s spending. Salaries of the public servants have been cut by 10 percent, while the number of unemployed people in the country has rose to 4.4 million in February this year.
Just a few years ago, China was a shining example of international economic activity. With its economy recording more than 9-10 percent annual growth rate for close to 25 years, the country of fire-spitting dragon, however, faced the worst last year when its economy registered only 6.9 percent growth. In March, at the National People’s Congress (NPC), an annual meeting of Parliament, Chinese leaders targeted 6.5 to 7 percent growth. Yet, it would not be possible to rid itself from economic slowdown so soon.
In view of such developments, experts say that it is hard to assume that BRICS would perform well. Rather they say the group is gradually losing its steam. “With most of the BRICS nations seeming to be in an economical difficulty, it is India which stands out and presents opportunity to the world,” Afra Afsharipour, a professor at the University of California said on the sidelines of a book launch in New Delhi.
Nonetheless, in consonance with BRICS’ Ufa initiatives, christened under ‘Das Kadam’, or 10 steps to the future, India will host the group’s first ever film festival and under 17 football tournament. New Delhi is also keen to see concretisation of announcements made during the Ufa summit over establishment of BRICS railway research centre, BRICS digital initiative, BRICS agricultural research centre and cooperation amongst supreme audit institutions of BRICS countries.
The first major project to be unveiled under new development plan would be in the field of clean energy. The forthcoming summit would be highly significant. But all that glitters is not gold. India has not yet decided to support a proposal to make almost 50 percent of intra-BRICS trade in Yuan, the Chinese currency. The proposal pending before member nations of the group for four years was overwhelmingly backed by Russia at the Ufa summit. It should be noted that at the fourth BRICS summit in New Delhi in 2012, the member countries had agreed to encourage trade in local currencies. The move was taken with the aim to replace the US dollar as the main unit of trade among them. But as years go by the issue is still stuck in politico-economic logjam. Exports among BRICS countries are continued to be invoiced in the US currency. Experts say that India faces a huge trade deficit of $48 billion with China. Given the situation when Beijing has decided to keep its currency weak, India will only exacerbate its financial problem if it supports the proposal of keeping 50 percent of intra-BRICS trade in Yuan.
Still India, which has already declared premising its BRICS chairmanship around the theme of ‘Building Responsive, Inclusive and Collective Solutions’, is hopeful about BRICS bank’s capability in funding inclusive needs of emerging economies. Significantly, from April 2016 when the process of disbursal of loans from BRICS bank starts, India will be the first country to gain the benefit of the five countries-led financial institute. Road, power, port and railways-are main infrastructure areas where India is seeking money from BRICS bank and Asian Infrastructure Investment Bank (AIIB) to feed their monetary requirements.
Since peace is must for economic development, India wants setting up of universal counter terrorism front to deal with the menace. “Our stand is that without implementing comprehensive convention on international terrorism we cannot do away with the menace,” a senior official from the MEA said, adding that within the group, India may undertake a move to set up a system to deal with money laundering issue and freezing of suspicious bank accounts and financial capital associated with terrorism. Also, with aim to strengthen BRICS’s counter-terrorism programme, India is planning to launch a mechanism that would encourage sharing of intelligence among the group’s members. In Antalya in Turkey where leaders of BRICS held a meeting on the sideline of the G-20 meet, the terrorism was a hotly discussed issue with each member expressing concern on increasing threat from ISIS. Youth from India, Russia and also China’s northwestern region of Xinjiang is getting sucked into ISIS’s devastative formulations envisaging establishment of Caliphate on territories lying between Iraq and Syria. To deal with ISIS and Taliban’s threat, Chinese parliament recently passed an anti-terror law, but Beijing is still reluctant to take a positioning in the global campaign against Jehadis or Islamic extremists.
On the issue of development of safe, balanced and effective transportation and logistics system, BRICS nations had put in place a conceptual framework at the Ufa summit. Sources say that at the forthcoming ministerial meet of BRIC nations in New Delhi, all matters related to development of infrastructure, use of innovative technologies to increase efficiency of transportation and logistics would be on the table. “We need to create a pool of experts and engineers from BRICS and help them develop technologies that could be energy efficient and contribute to enhancement of efficiency of transportation system,” a senior Government official said. Keeping this in view, tie up between reputed and well-established educational and technical institutes of all five BRICS countries is on the anvil. Initially emphasis is being laid on two major areas: development of roads, airports, seaports, railways and cutting down rough edges that exist in operationalisation of smooth transportation system. Before all this, BRICS’ nations planned to strengthen their air and maritime shipments so that they could export and import their merchandise products to each other without facing much hindrances and without letting their planned growth and competitiveness in the global economies take any beating. But question is: will such grandiose planning ever see execution? Can majority of BRICS members facing economic and political crisis, ever be able to give desired direction to the group, famously regarded as fast-growing economies with significant influence on regional and global affairs?