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BRICS | The coming together of the powerful five

  • IASbaba
  • June 7, 2021
  • 0
UPSC Articles
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GOVERNANCE/ ECONOMY

Topic:

  • GS-2: Important International institutions, agencies and fora- their structure, mandate. 
  • GS-2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

BRICS | The coming together of the powerful five

Origin of BRICS

  • BRICS was not invented by any of its members. In 2001, Goldman Sachs’ Jim O’Neill authored a paper called “Building Better Global Economic BRICs”, pointing out that future GDP growth in the world would come from China, India, Russia and Brazil.
  • Significantly, the paper didn’t recommend a separate grouping for them, but made the case that the G-7 should include them
  • The paper further that BRIC economies combined would outstrip the western dominated world order before 2039.
  • In 2006, leaders of the BRIC countries met on the margins of a G-8 (now called G-7) summit in St. Petersburg, Russia, and BRIC was formalised that year. 
  • The global financial crisis of 2007-08 reinforced the idea as BRIC countries had been relatively unscathed in the market collapse. 
  • Common ground for the members was built by ensuring that no bilateral issues were brought up in the forum.

Issues with BRICS

  • Lacks Focus: Despite being formed in 2006, the group still mystifies all and lacks focus.
  • Little in Common: Started as an alternate grouping of emerging economies that could challenge the post-War world order, it has been criticised as a rag-tag band of disparate countries across four continents with little in common
  • Russia-China Axis: Ties between countries such as Russia and China are growing at a much strong pace than the group’s own cohesion
  • Tensions: Also, the groups utility is being question in the light of growing tension between India and China
  • Bridge or Bulwark against West: India, Brazil and South Africa have equal, if not stronger, strategic ties with western powers today, prompting scholars to ask whether BRICS is a bridge between the east and west or whether it is being positioned as a bulwark against them.
  • Poor Performance:  The biggest blow to the BRICS firmament was dealt by the very company that laid its foundations. In 2015, Goldman Sachs wound up its BRIC fund, which had reportedly lost 88% of its asset value since 2010, and merged it with a larger emerging markets fund.
  • Long Term Investor Sentiment is dim for the group due to following reasons
    • China’s decision to launch the trillion-dollar Belt and Road Initiative in 2017 was opposed by India, and even Russia did not join
    • South Africa’s debt-laden economy and negative current account has led some to predict an economic collapse in the next decade. 
    • Brazil’s poor handling during the Covid-19 crisis has ranked it amongst the world’s worst-affected countries and its recovery is expected to be delayed. 
    • India’s economic slowdown was a concern even before Covid-19 hit, and government policies like “Aatmanirbhar” were seen as a plan to turn inward.
    • There are concerns about aggressions from China in the South China Sea, the border with India and internally in Hongkong and Xinjiang.

Achievements of BRICS

  • Regular Summits: All the contradictions and criticism notwithstanding, BRICS is an idea that has endured two decades, an idea its members remain committed to, and not one has skipped the annual summits held since 2009.
  • Alternative to World Bank: BRICS has created the New Development Bank (NDB) set up with an initial capital of $100 billion
  • BRICS Contingent Reserve Arrangement fund to deal with global liquidity crunches.
  • BRICS payment system proposing to be an alternative to the SWIFT payment system.
  • Stand on Geopolitical Events: While its foundation was economic, BRICS statements have always been deeply political, calling for more inclusion in the multilateral world order, decrying U.S.-Europe backed military interventions, and expressing an independent line on several world events from Afghanistan to West Asia.
  • BRICS countries move ahead on a “BRICS Vaccine Centre”, proposed to be based in Johannesburg, given that at least three members — Russia India and China — have manufactured a substantial chunk of all globally authorised vaccines.
  • BRICS has repeatedly called for reforming multilateral institutions, including the UN and the UNSC, International Monetary Fund and World Bank and the World Trade Organization.
  • BRICS supported negotiations at the WTO for the waiver of trade-related intellectual property rights (TRIPs) for vaccines and medicines to tackle the Coronavirus pandemic. 

Conclusion

It is still possible that the BRIC grouping could become as large as the G7 within the next generation. If international trade, investment, and financial flows between the BRIC countries and the rest of the world continue, this level of growth would be good for everyone.

Connecting the dots:

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