Dominant issue at BRICS summit

Subrata Majumder

BRICS summit at Goa made a consequential shift from an economic forum to political symposium. Terrorism was the main agenda. Till 7th BRICS summit, economic issues like financial substantiality and infrastructure development   were the key issues of the forum.

Goa declaration at 8th BRICS summit, which ensured that territory should not be used for terrorism, spine off a new synergy that terrorism overshoot economic integration.  Against the acrimony that the declaration lacked a knock-out blow to Pakistan, India’s gains accrued from the silent support of intransigent China against India’s surgical operation in POK and reminding Russia of India’s longest strategic partnership. The summit leveraged India’s new image from a receptive big brother to aggressive friend.  Had BRICS not taken place, dichotomy over China’s support for surgical operation would have continued.

China needs India more than India needs. In the economic front, China’s eagerness for investment in India in the wake of its hard landing and as an anti-dote  to India’s tough trade barriers against China ( such as anti-dumping and safeguard measures)  and in the political front , China’s yearn for India’s neutrality in the South China sea dispute,  act Chinese ardent need for India.

Till 7th BRICS Summit, a momentum was created for the economic alignment among the Asia’s economic power houses (excepting Japan), burying hatchet the political altercation. Every summit ended with a progressive outcome to put counterweight to USA and western hegemony. Notable outcome were setting up of BRICS National Development Bank (NDB) and launching of Contingent Reserve Arrangement (CRA). Both developments were at the initiative of India.

 Against the backdrop of this development in BRICS, the recent conflict between India –Pakistan leverages a gulf in between India and China.  The focus on terrorism and China’s dilution against India’s membership in NSG, committing for a second round of negotiations were the favourable outcome for India.

Much depend on now how on India will emphasize its right for NSG membership, which was vetoed by China. From China side, it is to be viewed that   how China will fledge economic muscle to reinforce its sovereign right in South China Sea and grope for India’s neutrality in the dispute. China’s concern over India’s role in South China Sea grew with a new chapter opened for closeness between India and Vietnam, when India committed for US $ 500 million aid to Vietnam for defence purchase during the recent visit of Prime Minister Narendra Modi.

South China Sea has been always an important factor for India’s external economy. Half of India’s trade passes through South China Sea. Besides, India’s oil interest   harps in Vietnam’s Exclusive Economic Zone (EEZ) in South China Sea. 

China and India are the main drivers of BRICS economy, which was reckoned the world’s most rising emerging economy by Goldman Sachs. The external health of three economies of BRICS is closely inter-linked with   China. They are Brazil, Russia and South Africa. With China slipping into slow growth, concerns are looming large over the economic health of these three member economies.

China is the biggest export destination for two BRICS countries – Brazil and South Africa and second biggest destination for Russia.  China accounted for 18 percent of Brazil’s global exports. The most important export earning of Brazil is iron ore. In 2014, around 47 percent of Brazil’s export of iron ore went to China. The fall in the steel output in China owing to overcapacity and bubble burst, will lead to drop in imports of iron ore by China and will impart a major impact on Brazil economy. 

Similarly, China is the second biggest stakeholder of Russia’s oil export.  Oil is the biggest export earning of Russia, sharing about 70 percent of its global exports. China accounts for 15 percent of Russia’s oil export. Therefore, China is the pivot to Russia’s export. Given the China’s predominance in Russia’s oil export, drop in oil import by China will affect Russian economy, which is already reeling under recession.

For India, BRICS’s significance is attached for its infrastructure funds. India needs US$ 1 trillion investment for infrastructure development.  To this end, setting up of BRICS National Development Bank (NDB) ensures a great help for India.  India was running pillar to post to international financial institutions for long-term finance for its coal based power plants, but was ripped off. This was   because World Bank, IMF and ADB were averse to provide fund for coal based power projects. Coal based power projects pose danger to clean energy. Since 2012, World Bank did not sign any memorandum of understanding for coal fired electricity projects with its member countries. ADB was selective in supporting coal based energy projects.

However, BRICS importance to India is not disturbed by in Chinese slowdown in the economy, unlike other member countries. This is because BRICS development bank can prove boon to India when the global financial institutions are in financial turmoil after the slump in European Union and USA‘s distant future for resurrection in the economy. National Development Bank and Asian Infrastructure Investment Bank (AIIB) are synonymous in their objectives.  Both were set up to provide fund for infrastructure projects in Asia.  NDB plus AIIB will pose a challenge to Bretton Wood institutes - World Bank and IMF. Bracketing NDM with AIIB, India is expected to have more clout in Asian Bretton Woods in regulating the funds for its infrastructure needs.

BRICS should be engaged more now with damage control measures to pep up the economies of the member countries than leaning towards bilateral negotiations. The windfall of BRICS lies with a common strong platform which can insulate the member countries from the economic recessions of developed countries and simultaneously facilitate the process of growth though intense collaboration between the member countries. (IPA)  

Thursday, 20 October, 2016