In­dia In­dian Trick

Even if In­dia is ahead of the other BRICS coun­tries in many ways, it could do well to stay within the for­ma­tion rather than step out of it.

Southasia - - CONTENTS - By Huza­ima Bukhari & Dr. Ikra­mul Haq

In­dian en­thu­si­asm about BRICS — the acro­nym cre­ated with the first letters of mem­ber states - Brazil, Rus­sia, In­dia, China and South Africa — was re­flected in Naren­dra Modi’s 10-Steps-for-Fu­ture pre­sented at the sev­enth sum­mit hosted by Rus­sia's Bashko­r­tostan in Ufa, along­side the 15th Shang­hai Co­op­er­a­tion Or­ga­ni­za­tion (SCO) Sum­mit on July 8-9, 2015. The In­dian Premier sug­gested hold­ing the first ever trade fair of the five mem­bers of BRICS.

The BRICS coun­tries rep­re­sent al­most three bil­lion peo­ple or ap­prox­i­mately 40 per­cent of the world’s pop­u­la­tion. BRICS ac­counted for over 17 per­cent of global trade, 13 per­cent of the global ser­vices mar­ket and 45 per­cent of the world’s agri­cul­tural out­put in 2014. The com­bined GDP (pur­chas­ing power par­ity) of the five BRICS coun­tries surged from $10 tril­lion in 2001 to $32.5 tril­lion in 2014.

In the latest par­leys, the group­ing, though look­ing odd due to di­ver­sity, showed com­mon­al­ity on many is­sues. All the five coun­tries dis­played sig­nif­i­cant in­ter­est in work­ing to­gether, find­ing syn­er­gies and ex­plor­ing new vis­tas of co­op­er­a­tion. It dis­pels skep­ti­cism that BRICS is still a non-starter.

The view that In­dia now feels con­strained to break away from BRICS and pur­sue de­vel­op­ment on its own was also proven un­founded. To the con­trary, the In­dian Premier pro­posed what he called ‘Das Kadam’ [Ten Steps] for fu­ture co­op­er­a­tion. This in­cludes es­tab­lish­ing a Rail­way Re­search Cen­tre, co­op­er­a­tion among au­dit in­sti­tu­tions, a Dig­i­tal Ini­tia­tive and an Agri­cul­tural Re­search Cen­tre.

Modi ap­peared ex­cited that ‘BRICS New De­vel­op­ment Bank’ even­tu­ally be­came a re­al­ity with an In­dian, MV Ka­math as its head. He pro­posed cross-BRICS col­lab­o­ra­tion and said the $100 bil­lion BRICS Con­tin­gency Re­serve Ar­range­ment would help calm the economies. He said cus­toms ar­range­ment among the BRICS na­tions would be a ma­jor step in boost­ing trade and that eco­nomic co­op­er­a­tion among the five coun­tries of Brazil, Rus­sia, In­dia, China and South Africa was very im­por­tant and would give a boost to man­u­fac­tur­ing.

Lead­ers of BRICS on July 7, 2015 cre­ated a Shang­hai-based de­vel­op­ment bank and a re­serve fund seen as coun­ter­weights to Western-led fi­nan­cial in­sti­tu­tions. The lead­ers of BRICS agreed to launch the in­sti­tu­tions to fi­nance in­fra­struc­ture projects and head off fu­ture eco­nomic crises.

Ahead of the Sum­mit, Chi­nese Pres­i­dent Xi Jin­ping met Modi and de­scribed their first en­counter as a "very fruit­ful meet­ing." The most im­por­tant vic­tory for In­dia was ac­cep­tance of its de­mand of equal share­hold­ing for all mem­ber coun­tries in the $50 bil­lion BRICS De­vel­op­ment Bank to avert dom­i­na­tion of any one share­holder. In­dia’s in­sis­tence on equal share­hold­ing was meant to avoid a re­peat of the dis­tor­tions that have crept into Bret­ton Woods in­sti­tu­tions like the In­ter­na­tional Mon­e­tary Fund, the World Bank and the Asian De­vel­op­ment Bank, in which rich coun­tries like the US and Ja­pan have a strong­hold. The BRICS De­vel­op­ment Bank would be set up with an ini­tial cor­pus of $50 bil­lion, with scope for ex­pan­sion to up to $100 bil­lion as new mem­bers are added.

In the fi­nal doc­u­ment of the Ufa dec­la­ra­tion re­leased on July 10, 2015, lead­ers of BRICS coun­tries, af­ter marathon rounds of talks, noted with anx­i­ety the frag­ile re­cov­ery of global growth, ex­press­ing un­easi­ness “about po­ten­tial spillover ef­fects from the un­con­ven­tional mon­e­tary poli­cies of the ad­vanced economies.” The United States’ re­fusal to rat­ify the IMF vot­ing re­forms re­mained a core con­cern, said the group. “We re­main deeply dis­ap­pointed with the pro­longed fail­ure by the United States to rat­ify the IMF 2010 re­form pack­age, which con­tin­ues to un­der­mine the cred­i­bil­ity, le­git­i­macy and ef­fec­tive­ness of the IMF,” said the doc­u­ment.

The Ufa dec­la­ra­tion also as­serted that “the NDB ( New De­vel­op­ment Bank”) shall serve as a pow­er­ful in­stru­ment for fi­nanc­ing in­fra­struc­ture in­vest­ment and sus­tain­able de­vel­op­ment projects in the BRICS and other de­vel­op­ing coun­tries and emerg­ing mar­ket economies.” The BRICS Bank will ap­prove its inau­gu­ral in­vest­ment projects in the first quar­ter of 2016, work­ing closely with the China-led AIIB. All five BRICS coun­tries are mem­bers of the Asian In­fra­struc­ture In­vest­ment Bank (AIIB). The Cen­tral Banks of the five coun­tries have also signed co­op­er­a­tion agree­ments with the New De­vel­op­ment Bank. An “Ac­tion Plan” that maps the 2016 tra­jec­tory of the group was also adopted.

China and Rus­sia have also said that they sup­port the UNSC as­pi­ra­tions of Brazil, South Africa and In­dia. BRICS lead­ers have vowed to work closely with the UN to up­hold in­ter­na­tional treaties: “We em­pha­size the need for uni­ver­sal ad­her­ence to prin­ci­ples and rules of in­ter­na­tional law in their in­ter­re­la­tion and in­tegrity, dis­card­ing the re­sort to “dou­ble stan­dards” and avoid­ing plac­ing in­ter­ests of some coun­tries above oth­ers,” said the doc­u­ment. BRICS coun­tries have regularly crit­i­cized Washington’s in­ter­ven­tion­ist for­eign pol­icy ap­proach, in­clud­ing air strikes in Mid­dle Eastern coun­tries, like Syria and Iraq. In a ma­jor break­through for Rus­sian Pres­i­dent Putin, his BRICS coun­ter­parts con­tinue to rally be­hind Moscow by op­pos­ing Western sanc­tions against Rus­sia over the Ukraine con­flict.

“We con­demn uni­lat­eral mil­i­tary in­ter­ven­tions and eco­nomic sanc­tions in vi­o­la­tion of in­ter­na­tional law and uni­ver­sally rec­og­nized norms of in­ter­na­tional re­la­tions. Bear­ing this in mind, we em­pha­size the unique im­por­tance of the in­di­vis­i­ble na­ture of se­cu­rity and that no State should strengthen its se­cu­rity at the ex­pense of the se­cu­rity of oth­ers,” added the Ufa com­mu­niqué.

The bloc re­it­er­ated its stance on the two-state the­ory for the PalestineIs­rael con­flict. The BRICS called for East Jerusalem to be es­tab­lished as the cap­i­tal of the state of Palestine and an end to Is­raeli set­tle­ment build­ing. “We op­pose the con­tin­u­ous Is­raeli set­tle­ment ac­tiv­i­ties in the Oc­cu­pied Ter­ri­to­ries, which vi­o­late in­ter­na­tional law and se­ri­ously un­der­mine peace ef­forts,” said the doc­u­ment. The Ufa com­mu­niqué also said that the BRICS “strongly con­demn hu­man rights vi­o­la­tions by all par­ties to the con­flict” in Syria.

For In­dia, break­ing away from BRICS is not fea­si­ble as most for­eign in­vestors do not seem to con­sider this af­fil­i­a­tion as re­pul­sive or neg­a­tive for them. In­dia's growth po­ten­tial, the diver­si­fied na­ture of its econ­omy and its struc­ture, and the demo­cratic na­ture of its polity means that it has to be judged on dif­fer­ent pa­ram­e­ters. Se­condly, many of the ba­sic is­sues and needs taken for granted in other emerg­ing coun­tries are yet to be ful­filled in In­dia given its huge pop­u­la­tion size, wide­spread dis­par­i­ties and in­come in­equal­i­ties. Even af­ter be­ing part of BRICS, there are cer­tain com­pul­sions for In­dia for think­ing be­yond. In­dia's growth op­por­tu­ni­ties and the ro­bust­ness of its pri­vate sec­tor place it in a league dif­fer­ent from that of Rus­sia or South Africa. It is not an econ­omy de­pen­dant on the com­mod­ity global su­per cy­cle. Its en­trepreneurs have forged ahead in dif­fer­ent in­dus­tries build­ing busi­nesses of last­ing value. Its strong ser­vices sec­tor, con­sump­tion growth, de­mo­graph­ics and en­gi­neer­ing and tech­no­log­i­cal prow­ess gives it an edge over its BRICS peers. In a re­cent study by Mor­gan Stan­ley it was found that busi­ness mod­els of In­dian pri­vate sec­tor com­pa­nies are among the best in the world. Chris Wood of CLSA re­cently re­it­er­ated his over­weight stance on In­dia de­spite wide­spread in­vestor con­cerns over eco­nomic growth and re­forms.

Ac­cord­ing to Jay­ati Ghosh, Pro­fes­sor of Eco­nom­ics at Jawa­har­lal Nehru Univer­sity in New Delhi, ul­ti­mately, sus­tain­able eco­nomic diver­si­fi­ca­tion to higher-val­ueadded and eco­log­i­cally vi­able ac­tiv­i­ties re­main the key to growth and de­vel­op­ment not just in the BRICS coun­tries but in other de­vel­op­ing coun­tries as well. In­dia is no ex­cep­tion. For In­dia and other coun­tries like Pak­istan the on­go­ing pe­riod of global flux pro­vides a valu­able op­por­tu­nity to en­cour­age and de­velop new ways of tak­ing such strate­gies for­ward through co­op­er­a­tion. The writ­ers, au­thors of many books and part­ners in law firm HUZA­IMA & IKRAM, are Ad­junct Fac­ulty Mem­bers at La­hore Univer­sity of Man­age­ment Sciences (LUMS).

Even af­ter be­ing part of BRICS, there are cer­tain com­pul­sions for In­dia for think­ing be­yond.

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