BRICS: Bigger, But better?

BRICS has served only a limited purpose, given its divergent composition. India has both opportunities and challenges before it once it expands in near future. — KK Srivastava

After the latest summit of original BRICS nations the grouping has expanded to include six more nations – Saudi Arabia, Iran, Argentina, Egypt, Ethiopia, and the UAE. Note that it was China and Russia which has been pushing hard to include new members. India was somewhat reluctant, but finally relented.

After the 6 members are inducted, the expanded grouping will represent 46% of the world’s population and 30% of its economic output. Presently the 5 member grouping controls 40% of the world’s population and generates 26% of the global GDP. However, the biggest impact will be in terms of the share of global oil production which will increase to 40% from the current 18%. On the other hand the group’s oil consumption share will jump from 27% to 36%. Similarly their share in global merchandise trade will rise from 20% to 25%, and that of global services trade will increase to 15% from 12%. Finally their share in the global forex reserves will increase from 39% to 45% of world’s total.

Thus this, in a way, signals the rise of a new global south which will offer a balancing challenge to the hegemony of the Global North in all matters, particularly global trade, energy security, global affairs, and international currency. If the group members work in cohesion then the global trade will tilt in favour of South under newly set terms of trade; there could be a new global order indeed. Ofcourse within the group, China and India together will contribute 74% of the group GDP. However, a positive development will be that China, which controls 70% of the BRICS GDP will be responsible for only 62% whereas the corresponding numbers for India will fall from 13% to 12% only. The new group will be home to 3.7 billion people.

The alliance has become one of the most ambititions one due to the membership of the world’s highest potential large economies. Besides, it is an important bulwark against the west’s hegemony. Indeed the block was born as early as in 2009 to challenges the existing (and somewhat unfavourable to South) global economic landscape. It was set up to promote cooperation among the significant 4 emerging economies (BRIC), to which S (South Africa) was added later. Purely from Indian perspective too things appear to be promising as far as economic potential is connected. But before we dwell on that what about some more intra group implications?

Well, like we said earlier, a new world order is under way, the bloc representing more forcefully the voice of developing countries. It will have oil under its control, the members together being both major producers and consumers. While there was a talk about setting up a BRICS currency during the lead up to the summit, for using in trade among members, nothing came of it eventually. However, there is now an increased possibility (though one cannot comment at the present juncture about the probability) of the de-dollarisation. 

But we cannot turn our eyes away from many discomforting facts. Despite its original ambitions, the bloc has largely failed to live up to its promise, nor has it succeeded in striking mutual cooperation. By way of comparison there is the G7. Chinese President Xi-Jinping said that the BRICS could offer a challenge to the G7. But remember, the G7 is a political alliance of developed countries heralded by the US. They hold similar views on political and diplomatic issues and have few conflicts among them.

On the other hand the BRICS has a mix of governance models, from democracy (in India) to a one party rule (in China). Besides, China and India, the neighbours, have an uneasy relationship, with distrust towards each others in many matters. The border issue between the two is not settled. The two countries have fought war. Moreover, Russia and China have recently become great pals, much to India’s discomfiture. 

Iran has a long history of being under Western sanctions. And though of late Saudi Arabia and the UAE are trying to free themselves from undue Western influences, within the (expanded) group Iran has an queasy relationship with the Arab Kingdoms.

Potentially speaking, focusing an economic growth will help the enlarged BRICS look beyond these long lasting conflicts and work to face common challenges. This should include securing funds for development activities, encouraging increased intra group trading, working for challenging the might of dollar, and providing synergistic support to one another. Economic and trade should be the basic platform to strengthen the group.

As far as India is concerned, there exists scope for increasing the bilateral trade between India and the 6 new countries. For example, India can increase its imports of wood, food products and plastic/rubber from Egypt. Similarly there are a whole lot of products (metal, Chemicals, consumer goods ….) that India can export to them. Presently India runs a negative trade balance with the UAE, Saudi Arabia, and even Argentina.

With the inclusion of Saudi Arabia and the UAE the revamped BRICS has around 30% share in India’s total trade in 2022-23. New India can push its trade ties with mineral rich Ethiopia, with whom trade is negligible, and double down on trade with Saudi Arabia. Besides, India, now a member of a more powerful BRICS, can confront western interests on global trade forums also. 

On the political front, besides aiming to resolve the Sino. Indian border issues on a bilateral basis, now India can work with other BRICS countries to reach an understanding with China on the issue of cross border terrorism.

Again, since of late China is struggling on key financial parameters, the alliance offers a great opportunity for India to strengthen its presence in the global market. China has multiple adversities – lowering economic growth, declining exports, troubled property market, waning consumption demand, etc.

Given the past record of the bloc, however, one cannot be over optimistic. There are many political economic contradictions, as pointed out above that mar the core five; these remain unresolved and are likely to get accentuated. China is in increasingly confrontational mood with India (the latest indicator being Xi deciding not to attend G20 submit at New Delhi). Also China and Russia both together aspire to transform BRICS into a counter to what they see as US led multilateral system, since they maximally face the Western sanction and pressure.

Given these issues, India has to prevent the expanded group from becoming a China dominated forum. Is it worth the effort? Well, the last words have not been said, certainly, on the group and its utility for India.               

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