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.
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.