BRICS & New Development Bank (NDB)

• The acronym BRIC was formulated by Jim O’Neill of Goldman Sachs in 2001, in a report on growth prospects of Brazil Russia, India and China, which together represent a significant share of the world’s population and GDP. As per the report, these countries would be amongst the world’s largest economies in the next 50 years. BRIC converted to BRICS with the addition of South Africa in 2010.
• All the 5 members of BRICS are leading developing or newly industrialized countries, but they have distinct features like large, fast-growing economies having significant influence on regional affairs, and all the five are members of G-20.
• The BRICS Leaders’ Summit is convened annually.
• The BRICS brings together five of the largest developing countries of the world, representing 41% of the global population, 24% of the global GDP and 16% of the global trade.
• It’s an emerging investment market and global power bloc.

Membership

• Brazil, Russia, India, China and South Africa

Objectives

The grouping was formed for mutual interest in the economic sphere, but the agenda of BRICS has
widened over the years to encompass topical global issues too. The objectives of BRICS are as follows:

• It aims to enhance market access opportunities and facilitate market inter-linkages.
• It aims to promote mutual trade and investment, and create a business-friendly environment for investors and entrepreneurs in all BRICS countries.
• They aim to strengthen macro-economic policy coordination, and build resilience to external economic shocks.
• They strive for inclusive economic growth in order to eradicate poverty, and address issues of unemployment and promote social inclusion.
• Overall, the platform aims to promote peace, prosperity, security and development in a multipolar, interconnected and globalized world.

With respect to the world, the objectives of BRICS are:

• BRICS countries act as a group to promote a more legitimate international system, including advocacy for reform of the UN Security Council.
• BRICS is a South-South framework for cooperation.
• It aims to act as a bridge between developed and developing countries. Example, in WTO, BRICS countries are trying to promote a fair order regarding the agricultural policies.
• BRICS can play an increasingly important role in assisting developing countries in gaining an advantage in trade and climate change negotiations at the global level.
• Creation of New Development Bank and Contingency Reserve can increase the bargaining power of developing countries.
• All these countries have a shared interest in challenging the current governance of Western financial institutions like IMF and World Bank.

Principles

• Full respect for the sovereignty of the member states.
• Commitment to international law and recognition of the central role of UN on peace, security and development.
• Bilateral relations among these countries have been conducted on the principles of non-interference, equality and mutual benefit.
• Openness, sharing of information and consensus in decision making.
• Recognizing the multipolar nature of global economic and financial system.

Structure of BRICS

• BRICS does not exist in form of organization, but it is an annual summit between the supreme leaders of five nations.
• The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.
• BRICS cooperation in the past decade has expanded to include an annual programme of over 100 sectoral meetings.

Timeline

• The first BRIC Summit took place in 2009 in the Russian Federation and focused on issues such as reform of the global financial architecture.
• South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS. South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.

Significance

• The five countries together represent 43% of global population, their combined GDP is 30% of global GDP, and they have a 17% share in world trade.
• BRICS represents Asia, Europe, Africa and Latin America, which gives their cooperation a transcontinental dimension which makes it more valuable and significant.
• BRICS economies have been regarded as the engines of the global economic recovery, which underscores the changing roles of these countries in the contemporary world scenario.
• In the aftermath of the recent financial crisis, BRICS countries were influential in shaping the macroeconomic policies in the G-20 meetings.
• In the present multipolar world, BRICS countries are helping the cause of developing countries and are key stakeholders in global decision making involving developing countries.
• With negotiations in WTO and climate change becoming important, the coming together of BRICS as a grouping has become more significant.

Main Areas of Cooperation within BRICS

1. Economic Cooperation

• There are rapidly growing trade and investment flows between BRICS countries as well as economic cooperation activities across a range of sectors.
• Agreements have been concluded in the areas of Economic and Trade Cooperation; Innovation Cooperation, Customs Cooperation; strategic cooperation between the BRICS Business Council , Contingent Reserve Agreement and the New Development Bank.
• These agreements contribute to realisation of the shared objectives of deepening economic cooperation and fostering integrated trade and investment markets.

2. People-to-People exchange

• BRICS members have recognised the need for strengthening People-to-People exchanges and to foster closer cooperation in the areas of culture, sport, education, film and youth.
• People-to-People exchanges seek to forge new friendships; deepen relations and mutual understanding between BRICS peoples in the spirit of openness, inclusiveness, diversity and mutual learning.
• Such People to people exchanges include the Young Diplomats Forum, Parliamentarian Forum, Trade Union Forum, Civil BRICS as well as the Media Forum.

3. Political and Security Cooperation

• BRICS member political and security cooperation is aimed at achieving peace, security, development and cooperation for a more equitable and fair world.
• BRICS provides opportunities for sharing policy advice and exchanges of best practices in terms of domestic and regional challenges as well as advancing the restructuring of the global political architecture so that it is more balanced, resting on the pillar of multilateralism.
• BRICS is utilised as a driver for South Africa’s foreign policy priorities including the pursuit of the African Agenda and South-South Cooperation.

4. Cooperation Mechanism

• Cooperation among members is achieved through:
  • Track I: Formal diplomatic engagement between the national governments.
  • Track II: Engagement through government-affiliated institutions, e.g. state-owned enterprises and business councils.
  • Track III: Civil society and People-to-People engagement.

Developments

• An advisory group to be set up for the full operationalization of Part NIR (Partnership on New Industrial Revolution) aimed at deepening BRICS cooperation in digitalization, industrialization, innovation, inclusiveness and investment.
• BRICS bank or New Development Bank (NDB) has been set up.
• BRICS has agreed to set up credit rating agency: to set up an independent rating agency based on market oriented principles. This would further strengthen the global governance architecture.
• There is proposal for establishing a BRICS Agriculture Research Platform, BRICS Railway Research Network, BRICS Sports Council, and various youth-centric fora; BRICS Media Academy and BRICS news portal.
• BRICS Business Council was established to represent many industries and economic sectors of these 5 countries.
• BRICS perceives power concentration in hands of Bretton Woods’ institutions as unfair and seeks to promote alternative models of development. They have targeted governance of IMF in every summit since 2009, including Goa. They have asked for a new quota formula that would ensure that the increased voice of the dynamic emerging and developing economies reflects their relative contributions to the world economy.
• BRICS agreed to intensify cooperation against terror groups like IS in West Asia and North Africa region (WANA).
• BRICS Think Tanks Council (BTTC) in 2013 was an important milestone in the institutionalization agenda.
• South Africa to host BRICS office: South Africa is set to reinforce its position as a regional economic hub as it prepares to open a regional office that would channel funding drawn from the New Development Bank (NDB) of the Brazil-Russia-China-India-South Africa (BRICS) grouping. The office to look at funding for South Africa and the nearby region.

BRICS Bank {New Development Bank (NDB)}

• The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa).
• According to the Agreement on the NDB, “the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments.” Moreover, the NDB “shall cooperate with international organizations and other financial entities, and provide technical assistance for projects to be supported by the Bank.”
• At the Fourth BRICS Summit in New Delhi (2012) the possibility of setting up a new Development Bank was considered to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies, as well as in developing countries.
• During the Sixth BRICS Summit in Fortaleza (2014) the leaders signed the Agreement establishing the New Development Bank (NDB).
• Fortaleza Declaration stressed that the NDB will strengthen cooperation among BRICS and will supplement the efforts of multilateral and regional financial institutions for global development thus contributing to sustainable and balanced growth.
• NDB’s key areas of operation are clean energy, transport infrastructure, irrigation, sustainable urban development and economic cooperation among the member countries.
• The NDB functions on a consultative mechanism among the BRICS members with all the member countries possessing equal rights.
• Major Projects funded by NDB in India:
  • It has committed funding to a number of major infrastructure projects in India, including the Mumbai Metro rail, Delhi-Ghaziabad-Meerut Regional Rapid Transit System and many Renewable Energy projects.
  • The NDB has so far approved 14 Indian projects for an amount of nearly USD 4.2 billion.
  • In 2020, India announced a 1 billion USD loan pact with NDB to boost rural employment and infrastructure.

Structure

• New Development Bank will have an initial subscribed capital of $50 billion which will be raised to $100 billion.
• The five members will have an equal share for each in the bank. So, no one member dominates the institution.
• Headquarters – Shanghai
• Bank will have African Regional Center in South Africa.
• India has assumed the first presidency of the bank.
• Chairman of Board of governors will be from Russia.
• The emergency reserve fund-which was announced as a “Contingency Reserve Arrangement” will also have $100 billion and will help developing nations avoid short-term liquidity pressures.
• It will have $41 billion from China, $5 billion from South Africa and $ 18 billion from each of the remaining nations.

Rationale

• Global financial institutions like IMF and world bank are dominated by US and western countries.
• IMF and world bank follow different voting power based on quota system. Though China is second largest economy after US, it has fewer voting rights.
• The financial institution created by BRICS will reduce the importance of US dollar as a global currency, and eventually it will increase importance of Yuan.
• IMF cash assistance program is conditional. If a country’s foreign policy clashes with US, then it will be difficult to obtain a loan.
• It will provide resources for infrastructure development of developing countries.

Challenges Associated with BRICS

• The marked dominance of big three Russia-China-India is challenge for the BRICS as it moves ahead. To become a true representative of large emerging markets across the world, BRICS must become pan-continental. Its membership must include more countries from other regions and continents.
• The BRICS will need to expand its agenda for increasing its relevance in the global order. As of now, climate change and development finance, aimed at building infrastructure dominate agenda.
• As BRICS moves forward foundational principles of BRICS i.e. respect for sovereign equality and pluralism in global governance are liable to be tested as the five member countries pursue their own national agendas.
• The military standoff between India and China on the Doklam plateau, which has effectively brought to an end the naive notion that a comfortable political relationship is always possible amongst the BRICS members.
• China’s efforts to co-opt nation states, which are integral to its Belt and Road Initiative, into a broader political arrangement has potential to cause conflict among BRICS members especially China and India.
• Heterogeneity: It is claimed by critics that heterogeneity (variable/diverse nature of countries) of the BRICS nations with its diverse interests possess a threat to the viability of the grouping.
• China Centric: All the countries in the BRICS group trade with China more than each other, therefore it is blamed as a platform to promote China’s interest. Balancing trade deficit with China is a huge challenge for other partner nations.
• Not Been Effective: The five-power combine has succeeded, albeit up to a point. However, China’s economic rise has created a serious imbalance within BRICS.
  • Also the group has not done enough to assist the Global South to win their optimal support for their agenda.

Importance of BRICS for India

• Geo-Politics: Present geopolitics has made it difficult for India to carve a middle path for balancing its strategic interests between the U.S and the Russia-China axis.
  • Therefore, the BRICS platform provides an opportunity for India to balance the Russia-China axis.
• Global Economic Order: BRICS countries shared a common objective of reforming the international financial and monetary system, with a strong desire to build a more just, and balanced international order
  • To this end, the BRICS community plays an important role in the G20, in shaping global economic policies and promoting financial stability.
• Terrorism: BRICS also provides a platform for India to galvanize its efforts against terrorism.
• Global Grouping: India is actively pursuing its membership for the United Nation Security Council (UNSC) and Nuclear Supplier Group (NSG).
  • China forms the major roadblock in pursuing such goals.
  • Therefore, BRICS provides an opportunity to actively engage with China and resolve the mutual disputes. It also helps in garnering support of other partner countries.

Recent Initiatives of BRICS

• BRICS Media Forum: In March 2022, the BRICS countries (Brazil, Russia, India, China and South Africa) launched a three-month-long training programme for journalists.
  • The programme was an initiative of the BRICS Media Forum.
• BRICS Meeting on Climate Change: In May 2022, the Union Minister of Environment, Forest and Climate Change participated in the BRICS high-level meeting on Climate Change.
  • In the meeting, India highlighted the relevance of the forum to jointly address climate change, to explore approaches to accelerate low-carbon and resilient transition, and to achieve sustainable recovery and development.

Way Forward

• As the BRICS grouping continues its institution building mission, it is important to remember that equity, redress and fairness should become crosscutting ideals informing all initiatives.
  • Opting out of existing groupings will simply allow China a free hand (even in those organizations where it is not a member but has loyal proxies). Instead, it might be better for India to remain engaged and to counter China wherever possible.
• Clearly, there is a need to revive the forgotten India, Brazil, South Africa group (IBSA)-perhaps enlarge it to include Turkey, Indonesia, South Korea and the like to develop alternatives to China-centric groupings.
• Similarly, India also needs to invest more in building groups that bridge the north-south divide. One such group is the G4 (Brazil, India, Germany and Japan) aspirants to the UN Security Council.
  • The group has solely focused on UNSC till now, might be time for them to enlarge agenda to other avenues.
• BRICS countries should now begin to work together on establishing Free Trade Area (FTA).
• BRICS, like ASEAN and SCO, can invite ‘dialogue partners and observers’ from various parts of the globe, especially from the developing countries. This would provide them with greater responsibility of the developing countries, and might give them with a much needed enthusiasm to fast track processes and institutionalization.
• BRICS did well in its first decade to identify issues of common interests and to create platforms to address these issues. For BRICS to remain relevant over the next decade, each of its members must make a realistic assessment of the initiative’s opportunities and inherent limitations.
• BRICS nations need to recalibrate their approach and to recommit to their founding ethos. BRICS must reaffirm their commitment to a multi-polar world that allows for sovereign equality and democratic decision making by doing so can they address the asymmetry of power within the group and in global governance generally.
• They must build on the success of the NDB and invest in additional BRICS institutions. It will be useful for BRICS to develop an institutional research wing, along the lines of the OECD, offering solutions which are better suited to the developing world.
• BRICS should consider a BRICS-led effort to meet their commitments under the Paris Agreement on climate change and the UN’s sustainable development goals. This could include e.g. setting up a BRICS energy alliance and an energy policy institution.
• NDB in partnership with other development finance institutions could be a potent vehicle to finance progress towards the sustainable development goals amongst the BRICS members.
• Idea of setting up a BRICS Credit Rating Agency (BCRA) as proposed by India, opposed to Western agencies like Standard & Poor’s, Moody’s etc can be on BRICS future agenda.