Prof Ashwani Mahajan
The recently concluded summit of the BRICS group consisting of five countries was held in Johannesburg, South Africa. Prime Minister of India Narendra Modi, President of China Xi Jinping, President of Brazil Lula da Silva, President of South Africa Cyril Ramaphosa participated in person in the conference. In addition, Russian Foreign Minister Sergey Lavrov represented Russia and Russian President Vladimir Putin participated in the conference through video conferencing. The special thing about this conference was that now 6 more countries are in BRICS; It was also decided to include Argentina, UAE, Iran, Saudi Arabia, Ethiopia and Egypt.
BRIC was a term first coined by Jim O’Neill, a Goldman Sachs economist, in 2001, predicting that four countries, Brazil, Russia, India and China (BRIC) will dominate the global economy by 2050. Though BRIC formally came into existence in 2009, when its first summit took place; but the discussions to form such group were initiated in 2006. Later in 2011 South Africa formally joined BRIC and since then this group is called BRICS.
Although it’s a common practice in the world to promote mutual cooperation by forming groups of countries, but BRICS is more than a group of countries. In fact, whereas, till now America and the countries of the West had a dominance in the global system, this is a group of those countries, which have been challenging their economic clout. From the diplomatic point of view, whether it is cooperation or mutual tussle between different countries, it is expressed in a very diplomatic manner. It is worth noting that at present the five countries which are included in the BRICS, have been growing rapidly in terms of their GDP. Generally, the rate of growth in these countries has been significantly high, while the growth of developed countries has come to almost a standstill. This is the reason why the share of these five BRICS countries in the global GDP, which was only 20.51 percent in the year 2011, has increased to 26.62 percent by the year 2023.
It is noteworthy that before the formation of BRICS, there was hardly any effective global platform to raise the voice of the developing world. After the formation of BRICS, the issues of developing countries started getting some voice. Perhaps, that is why now more and more developing countries are keen to join BRICS. In this conference, where it has been decided to include 6 more countries in BRICS, it needs to be understood that what are the implications of this expansion of BRICS?
After the inclusion of 6 countries, the enlarged group will represent 29.6 percent of the global GDP and 46 percent of global population.
Groups like BRICS try to protect interests of developing countries. Significantly, at present countries like USA and Europe try to impose their conditions on the developing countries. But at the same time developing countries are also striving to find solutions for themselves. Recently, after the beginning of Russia-Ukraine conflict, Europe and USA imposed sanctions on Russia, meaning thereby, Russia wouldn’t be able to receive payments from the countries engaged in trade relations with Russia. In essence, they will be excluded from the ‘SWIFT’ system coming in Europe’s sphere of influence.
At the same time, Europe and USA banned the release of Russian funds to Russia held with their central banks and other banks. In such a situation, most of the developing countries of the world are now apprehensive of USA and Europe. The developing countries, which have been striving hard to remove their poverty and tread on the path of development, are trying to find ways and means to reduce the influence and hegemony of the developed nations.
It’s interesting to understand how BRICS and now its expanded form will meet expectations of the developing world.
Significantly, except China and Russia, all other countries have been facing the problem of trade deficit, resulting in continuous devaluation of their respective currencies. Not only this, while struggling with trade and payment deficits, these countries have also been facing problems of payments many times. This balance of payments problem can be solved to some extent by settlement of international trade in domestic currencies. However, India has moved towards settlement of international trade in rupees and has made significant progress in this regard with banks of 19 countries opening Vostro accounts to accept rupee payments. But developing countries at large have largely not been able to achieve much success with respect to international payments in domestic currencies.
Talks on international payments in domestic currencies have been going on in BRICS for some time now. Not only this, the exercise to start a new reserve currency in the name of BRICS currency is also going on among the BRICS countries. The advantage of this new BRICS currency is that it would increase trade among BRICS countries and also avoid the high cost of conversion to dollars. But the decision about BRICS currency is not going to be an easy task.. However, initially BRICS countries are showing great willingness to trade in domestic currencies among themselves. There are reports that during this Summit, BRICS countries have finally decided to make international trade payments in their local currencies. India, South Africa and Brazil, especially, have taken steps towards trading in domestic currencies. Although India has also initiated some amount of trade payments with Russia in Rupees.
The expansion of BRICS will give impetus to payments in international trade in domestic currencies. This will help reduce the monopoly of the dollar. Not only this, since most of the BRICS countries are struggling with the problems of balance of payments, this can help them to get rid of the imperative of dollars and the problems of balance of payments to a great extent. Not only this, the economic growth of these countries can also get boost due to increase in mutual trade among BRICS countries. In fact, it can be helpful to a great extent in increasing mutual relations and cooperation among developing countries.
Dilemma of BRICS countries
There was a time when the world was bipolar. America on one side and Soviet Union on the other. The world was divided into two such camps, supporters of USA and supporters of Soviet Union. Many countries, including India, were non-aligned to these groupings and were known as the non-aligned nation. After the collapse of Soviet Union, the world became uni-polar. But at present a multi-polar world is emerging due to the decline in the influence of USA on the one hand and the rising power of India, China and some other developing countries on the other. But some countries are still seen standing behind some big powers. Although the BRICS group appears to be emerging as a powerful group, free from European and American influence, some of these six countries that are being included in BRICS till recently, were under US influence, but there are some countries which were earlier under the influence of America, but now they are no longer under the influence of USA, because in the changing times, the allegiance of these countries has shifted away from America. On the other hand, the influence of China has also increased in the world and some countries are also seen coming under the influence of China. Doubts are also being raised about how the BRICS grouping will be able to work cohesively due to different countries having their different allegiances, with India and China having bitter relations.
(The author is Professor, PGDAV College, University of Delhi)
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