Relevance of BRICS in new world order

The sixth Brics (Brazil, Russia, India, China, and South Africa) Summit was significant for a number of reasons. It started the second round as all five members had already hosted one summit each. For the debutant Prime Minister of India, Narendra Modi, it provided a stage for presenting his vision. Finally, it set up the New Development Bank (NDB) as well as a Contingency Reserve Fund (CRF) of $100 billion to help the five members or other developing countries encounter foreign exchange stress.

The Fortaleza Declaration, running over 72 paragraphs, and an action plan is a tour de horizon of concerns of Brics members in particular and current global political flash points generally. There are standard formulations like aspiring for “peace, security, development and cooperation”. It seeks a new international trading system that is “open, inclusive, non-discriminatory, transparent and rule-based”. This hints at developed countries espousing new trading blocs, like the US announcement of the Trans-Pacific Partnership, under-cutting the free trade principle on which the World Trade Organisation is based. But Brics members, too, have been moving in that direction, i.e., the China-Asean (Association of Southeast Asian Nations) Free Trade Area, implemented in 2010.

The declaration also underscores that existing structures dealing with international finance lack legitimacy and criticises resort to ad hoc arrangements. This refers to the continuing stalemate over the rebalancing of voting rights at the World Bank and International Monetary Fund, in line with contemporary economic worth of the members. For instance, Brics constitute one-fifth of the global economy but only have 11 per cent of the voting rights. The ad hoc arrangement has been the expansion of the G7 developed countries’ club to first include Russia and then involve emerging economies, in restricted engagement, to make it G20.

While undeniably though areas of engagement of Brics members have expanded and concrete steps now taken to establish a bank and a financial facility, many questions remain on the relevance of the grouping. It was born, a four-member Bric acronym, as follow-up to the prognostication of Jim O’Neill of Goldman Sachs in 2001 that projected growth rates destined these four nations to grab more economic space in the world in the coming decades. The 2008 financial crisis, followed by the eurozone tremors, resulting in global economic slowdown revealed the frailties of all members, albeit on a differentiated scale. While Chinese and Indian gross domestic product growth fell to around seven per cent and five per cent respectively, the other three slowed more precipitately. The Economist magazine in 2013 talked of a post-Brics order. Ruchir Sharma, in his book, Breakout Nations predicted new rising stars on the global horizon like Indonesia, Mexico or even Turkey, pointing out that competing political interests of the five will be the stumbling block to success of Brics.

Some paradoxes are obvious. Chinese economy is larger than that of the other four put together. Chinese trade with the four is 7.8 per cent of its global trade volume, but there is relatively less commercial dealings amongst the other four. While China funnelled $20 billion in direct investment in the others in 2013, flow of capital amongst others was low.

More critically, there is strategic non-convergence. Russia’s stand-off with the West over Ukraine, exacerbated by the July 17 shooting down of Malaysian airways flight MH17, likely by a Russian surface to air missile, puts it de facto in the Chinese corner. Recent Sino-Russian gas deal only testifies to this convergence. South Africa entered Brics, despite its economic and demographic deficiencies, at Chinese insistence. Brazil has been known to play the game as it suits it. In any case, as three commodity suppliers — Russia, Brazil and South Africa — will kowtow to China in any differences that India may have in Brics institutions in the future. This is not to say India should resist institution making, but that India must realise its relative weakness within Brics.

How should India thus situate itself in the emerging world economic and political order? Obviously, India has to seek a balance outside China-led or likely dominated structures, while remaining a valid voice within them. That is where PM Modi’s job has just begun. His rather trite attempt at flattering Vladimir Putin, with every Indian child knowing who India’s friend is, will only go that far with a hardened ex-KGB operative, while being noted in Western and East Asian capitals. Mr Modi would need more than verbal jugglery when he catches up with Japanese PM Shinzo Abe and US President Barack Obama. He would need honesty, consistency and vision that translates his electoral promises into a coherent Indian role as a custodian of liberal and progressive values.

The role of Brics for outreach to Latin America and Africa is obvious. But it needs to be noted that others are not going to tailor their outreach to those regions to Brics agenda. Rather, it will be the other way around. Brics is useful for collective bargaining with the West on climate change, Doha Round of WTO and concepts of sustainable development as indeed reform of multilateral institutions. The evangelism will last as long as the interests of the Brics nations do not diverge. For instance, on United Nations Security Council reform, of which Russia and China are permanent members and to whose permanent membership Brazil and India are clear aspirants with South Africa mired in an African consensus building. The Fortaleza Declaration merely repeats the old, irritating Chinese refrain that it would like them to play a “greater role”.

In conclusion, the Brics Summit merits some praise laced with the caution that it must not become an anti-West, institution-bashing club. It is a useful bridge to enable world’s transition from a post-Second World War order to a 21st century, more equitable and stable paradigm.