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Significance and Achievements of BRICS Summit 2014

July 19, 2014

Before we discuss the Brazil summit, let us first begin with the strides made by the BRICS nations Brazil, Russia, India, and China, over the years since the concept of BRIC was floated by Jim O’Neill, an investment banker with Goldman Sachs.  South Africa, with a much smaller economy entered the group in 2011.

Significance and Achievements of BRICS Summit 2014Genesis and Growth of BRICS Countries :

O’Neill had conceived that developing countries such as Brazil, Russia, India and China could emerge as the new engine of growth. He wrote a paper entitled “Building Better Global Economic BRICs”, to advise his clients to invest their money in these new emerging economies. He was right in his analysis. The following decade was a remarkable period of growth for the BRICS countries.

As of 2013, with a combined nominal gross domestic product (GDP) of US$16.039 trillion, they rose to together account for an estimated US$4 trillion in combined foreign reserves. Their rapid strides led the International Monetary Fund (IMF) predict in 2011 that the BRICS would account for 37 per cent of global growth in the period 2011-16, while the share of G7 economies in global output production will fall from 48 per cent to 44 per cent over the same period. Similarly, a 2012 study by the Directorate-General for External Policies of the European Parliament showed that over the last decade BRICS established distinct ways and means of economic cooperation, especially through south-south economic cooperation with the highly vulnerable low income countries. (A recent Washington Post article pointed out that the value of South-South trade now exceeds North-South trade by some $2.2 trillion—over one-quarter of global trade. Low-income countries have also seen unprecedented growth in “South–South” foreign aid—with China, Brazil, and India all becoming larger donors).

BRICS indeed made giant strides but when the BRICS leaders met at Fortaleza in Brazil this month, economies of the BRICS nations had shown signs of weakness and money had begun flowing back to the West. China’s growth rate had declined from 14 per cent just a few years ago, to just 8 per cent last year. India’s economic expansion has come down from the high of 10 per cent to less than 5 per cent in 2013. Similar was the case of Brazil where the growth rate came down from 6 per cent to 3 per cent. Amidst mounting worries, commentators were more eager to write off the great BRICS dream.

Significance of the Brazil Summit :

It was apt therefore that the theme of the Summit was ‘Inclusive Growth: Sustainable Solutions’.

Understandably, the Brazil summit was crucial to chart out ways for reviving the BRICS economy for the very survival of the arrangement. Hence it was a significant achievement of the summit to bring a consensus on the Contingency Reserve Fund to insulate emerging economies from currency volatility and help bail out the member country from a crisis situation.

Given the prevailing differences among the member countries for the setting up of the New Development Bank to counter Western hold on global finances, it was important for the members to sort out the matter. The agreement on setting up the Bank just about 10 minutes before the end of the summit, hence, was a big achievement after negotiations on its formation had dragged on. The establishment of the bank was agreed to by BRICS leaders at the last summit in Durban, South Africa on 27 March 2013. However, there were differences as Brazil and India contested China’s attempts to get a bigger share in the lender than the others. Moreover, India and China had their differences over the headquarters and first presidency. China finally yielded to Brazil and India’s demand of keeping equal equity at its launch. India, which got the first presidency, agreed on Shanghai as the headquarters of the Bank.

The members climbing down from their stated position to accommodate each others’ concerns was an outstanding achievement of the Brazil summit, which will go a long way to strengthen south-south cooperation and dispel any doubt over the future of BRICS.

Another important decision at the summit was the initiative to form a joint fund to invest in BRICS infrastructure projects that could provide equity financing services for projects in BRICS countries and complement the BRICS bank.

The way BRICS leaders rallied behind Russia, facing isolation from the West over its role in Crimea and Ukraine, is a case in point. It is significant too that Russia will host the Seventh BRICS Summit in 2015 in the city of Ufa.

What the Brazil Summit Means for its Members :

China Daily newspaper termed it as a ‘milestone’, stating: “For the first time, the meeting of the group’s five members is not merely a business forum but is branded with strong political elements.” It recognised that the inclusion of “the political agenda would give developing nations an increasingly united voice, and thus more clout on major global issues”.

As for India, there were many takeaways from the summit. Besides the presidency of the New Development Bank for the next five years, the summit offered a perfect platform to Narendra Modi to interact with world leaders on his very first overseas tour as India’s new prime minister. His meeting with Chinese President Xi Jinping was hailed by the Chinese media as a “good start in building mutual trust and will help usher in a new era with huge economic potential”. Jinping also extended an invitation for the first time to an Indian Prime Minster, to attend the next Asia Pacific Economic Cooperation summit in Beijing this November.

Modi’s support of Russian President Putin too got the endorsement of the Summit.

Of course, India did have a role to play in Brazil and the success of the summit has been a great achievement for keeping afloat the BRICS dream.

WBDP19.07.2014

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Disclaimer: The views expressed are of those of the author and do not represent the views of Elections.in.

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