BRICS: Global Dynamics, Economic Cooperation, & Institutional Reforms

BRICS Overview

• BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa.
• The members are known for their significant influence on regional affairs.
• Since 2009, the BRICS nations have met annually at formal summits.
• Originally the first four were grouped as “BRIC” before the induction of South Africa in
• Brazil hosted the most recent 11th summit on 13–14 November 2019.

BRICS Member Countries

• Founding Members were Brazil, Russia, India & China.
• Later South Africa joined in the group in 2010

Evolution of BRICS

• The acronym “BRICS” was initially formulated in 2001 by economist Jim O’Neill, of Goldman Sachs, in a report on growth prospects for the economies of Brazil, Russia, India and China – which together represented a significant share of the world’s production and population.
• In 2006, the four countries initiated a regular informal diplomatic coordination, with annual meetings of Foreign Ministers at the margins of the General Debate of the UN General Assembly (UNGA).
• This successful interaction led to the decision that the dialogue was to be carried out at the level of Heads of State and Government in annual Summits.
• 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 Summit in Sanya, China, in March 2011.

BRICS Salient Features

• An estimated total population of about 21 billion, or about 27% of the world land surface and 41% of the world population.
• These five nations had a combined nominal GDP of US$18.6 trillion, about 2% of the gross world product, a combined GDP (PPP) of around US$40.55 trillion (32% of World’s GDP PPP), and an estimated US$4.46 trillion in combined foreign reserves.
• It’s an emerging investment market and global power bloc.

BRICS Goals and Objective

• The BRICS seeks to deepen, broaden and intensify cooperation within the grouping and among the individual countries for more sustainable, equitable and mutually beneficial development.
• This organization takes into consideration each member’s growth, development and poverty objectives to ensure relations are built on the respective country’s economic strengths and to avoid competition where possible.
• BRICS is emerging as a new and promising political-diplomatic entity with diverse objectives, far beyond the original objective of reforming global financial institutions.

BRICS Areas of Cooperation

• Economic Cooperation
• There are rapidly growing trade and investment flows between these 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 realization of the shared objectives of deepening economic cooperation and fostering integrated trade and investment markets.
• People-to-People exchange
• This organization members have recognized 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 the organization 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.
• Political and Security Cooperation
• This organization’s 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.
• This organization is utilized as a driver for South Africa’s foreign policy priorities including the pursuit of the African Agenda and South-South Cooperation.
• 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.

Impact of BRICS on Institutional Reforms

• The main reason for co-operation to start among the organization nations was the financial crisis of 2008. The crises raised doubts over sustainability of the dollar-denominated monetary system.
• The organization called for the “the reform of multilateral institutions in order that they reflect the structural changes in the world economy and the increasingly central role that emerging markets now play”.
• BRICs managed to push for institutional reform which led to International Monetary Fund (IMF) quota reform in 2010. Thus the financial crises had momentarily reduced western legitimacy and briefly let the organization countries become “agenda setters” in multilateral institutions.

New Development Bank

• NDB is headquartered in Shanghai.
• 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 Summit in Fortaleza (2014) the leaders signed the Agreement establishing the New Development Bank (NDB).
• The Fortaleza Declaration stressed that the NDB will strengthen cooperation among the organization 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.

Contingent Reserve Arrangement

• Considering the increasing instances of global financial crisis, nations signed BRICS Contingent Reserve Arrangement (CRA) in 2014 as part of Fortaleza Declaration at Sixth BRICS
• The BRICS CRA aims to provide short-term liquidity support to the members through currency swaps to help mitigate the BOP crisis situation and further strengthen financial stability.
• The initial total committed resources of the CRA shall be one hundred billion dollars of the United States of America (USD 100 billion).
• It would also contribute to strengthening the global financial safety net and complement existing international arrangements (IMF).
• Interbank Local Currency Credit Line Agreement:

It is a non-binding umbrella agreement which would serve as an enabler to enter into bilateral agreements with member banks subject to national laws, regulations and internal policies of the signatories.

Local currencies usage will promote mutually beneficial economic cooperation, mitigate currency risks, increase trade, and facilitate companies in accessing the BRICS markets.

• Johannesburg Declaration:
• Importance of 4th Industrial Revolution: It recommends the establishment of BRICS Partnership on New Industrial Revolution (PartNIR).
• ‘BRICS outreach to Africa’ and ‘BRICS Plus’ formats: BRICS plus format initiated at Xiamen Summit in 2017 by inviting a few countries from different regions was carried forward in Johannesburg Summit also.

BRICS: Importance for India

• India can benefit from the collective strength by way of consultation and cooperation on economic issues of mutual interests, as well as topical global issues, such as, international terrorism, climate change, food and energy security, reforms of global governance institutions, etc.
• India remains engaged with the other countries of this organization on its NSG membership.
• This organization is an integral part of India’s grand strategy, and a vehicle in India’s journey from being a norm taker to a norm shaper.
• It offers greater bargaining space as India seeks to gain more prominence in institutions of global governance, and shape them in the liberal international tradition with a southern ethos.
• The NDB will help India to raise and avail resources for their infrastructure and sustainable development projects. The NDB has approved its first set of loans, which included a loan of US$ 250 million in respect of India for the Multitranche Financing Facility for Renewable Energy Financing Scheme’.

Role of BRICS in Multi-Polar World

• This organization needs to acquire weight in the international space so as to respond to contemporary realities. It needs the engagement of all the stakeholders
• The economic-financial sphere stands out as one of the most promising areas of activity.
• High growth rate, economic potential and demographic development are putting the organization increasingly in a leading position in setting the global agenda and having a greater say in global governance.
• Also, this organization as a group is expected to step up their role and extend to pressing peace and security challenges,from terrorism, piracy and nuclear non-proliferation to regional security in North Africa and the Middle East.
• In areas of Climate change this organization as a grouping works on common agreed principles.
• Hearing voices from 40% of the world is a step towards equality.

Johannesburg Declaration

• Importance of 4th Industrial Revolution: It recommends the establishment of BRICS Partnership on New Industrial Revolution (PartNIR).
• ‘BRICS outreach to Africa’ and ‘BRICS Plus’ formats: BRICS plus format initiated at Xiamen Summit in 2017 by inviting a few countries from different regions was emulated in Johannesburg Summit also.

11th BRICS Summit

• The 11th Summit was held in Brasilia, Brazil.
• At a time when the five countries are heading in different directions politically, they found ways to build a common vision for the world’s economic future
• Emphasis on multilateralism and a joint statement at Brasilia that decried “unilateral and protectionist” actions.
• Member nations held dialogues on cementing ties in trade, innovation, technology and culture.
• The grouping decided to open a regional office of the New Development Bank (NDB) in India.
• Terrorism was one of the priority areas for 2019.

Key Focus Areas

India’s stand in the BRICS Summit 2019

• India put forward the concern of increasing terrorism in the world.
• As per PM Modi’s speech in the summit, the menacing threat of terrorism has caused the world economy of huge value of $1 trillion.
• He proposed various steps that needed to be taken into account in order to overcome this loss.
• India invited the leaders of the participating countries to invest in India’s infrastructure development which will eventually help in increasing the trade participation of India.
• India also proposed to hold the first meeting of BRICS Water Ministers in India.

XII BRICS Summit, 2020

• XII Summit was Held on 17 November 2020 Via Video conference
• The theme of the Meeting of the Leaders was “BRICS Partnership for Global Stability, Shared Security and Innovative Growth”.
• The main purpose of the Russian BRICS Chairmanship in 2020, as it is for a multifaceted cooperation between the countries, is to contribute to raising living standards and quality of life for our peoples.
• This year the five countries have continued close strategic partnership on all the three major pillars: peace and security, economy and finance, cultural and people-to-people exchanges.

Challenges Faced by BRICS

• The marked dominance of the big three Russia-China-India (RIC) is a 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 the 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 and Ladakh, 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.

Way Forward

• BRICS should promote comprehensive development of all states both big and small and enhance mutually beneficial cooperation among them on the basis of shared interests.
• A civil society dialogue is much needed.
• Organization nations should strive for peaceful and politico-diplomatic settlement of crisis and conflict in various regions of the world.
• BRICS, being one of the pillars of the emerging fairer polycentric world order,plays an important stabilizing role in global affairs.
• Democratization of international issues agreements on global agendas should be reached with the widest and equal participation of all stakeholders and be based on universally recognised legal norms.
• The principle of respect for cultural and civilizational diversity of the world should be a top priority.
• In the storming ocean of world politics, this organization can contribute significantly in maintaining international stability and ensuring global economic growth and becoming a united center of the multipolar world.

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