declarations sealed at the 8th BRICS Summit to ensure that territory would not be used for terrorism, spun off a new synergy that dictated that terrorism overshoot economic integration.
Against the acrimony that the declarations lacked a knock-out blow to Pakistan, India’s gains accrued from the silent support of China and from reminding Russia of its long-standing strategic partnership with India.
The Summit leveraged India’s new image from a receptive big brother to aggressive friend. Had BRICS not taken place, dichotomy over China’s support for surgical operation in PoK would have continued.
Till the 7th BRICS Summit, a momentum was created for the economic alignment among the Asia’s economic power houses (excluding Japan).
Every Summit ended with a progressive outcome designed to counterweigh USA and western hegemony. Notable outcome were the setting up of BRICS National Development Bank (NDB) and launching of Contingent Reserve Arrangement (CRA). Both developments were at the initiative of India.
Against the backdrop of these development in BRICS, the recent conflict between India and Pakistan leverage a gulf in between India and China. The focus on terrorism and India’s bid for membership in NSG which prompted a second round of negotiations, were the favourable outcomes for India.
Much depends now on how India will emphasize its right for NSG membership, which was vetoed by China. From China’s side, it is to be viewed how China will build economic muscle to reinforce its sovereign right in South China sea and grope for India’s neutrality in the dispute.
China’s concern over India’s role in South China sea grew with a new chapter opened with close ties developed between India and Vietnam, when India provided $500 million aid to Vietnam for defence purchases during the recent visit of Prime Minister Narendra Modi.
South China sea has been always an important factor for India’s external economy. Half of India’s trade passes through South China sea. Besides, India’s oil interest harps in Vietnam’s Exclusive Economic Zone (EEZ) in South China sea. China and India are the main drivers of BRICS economy, which was reckoned as the world’s next emerging economy by Goldman Sachs.
The external health of three economies of BRICS, Brazil, Russia and South Africa. are closely inter-linked with China. With China slipping into slow growth, concerns are looming large over the economic health of these three member economies.
China is the biggest export destination for two BRICS countries – Brazil and South Africa, and second biggest destination for Russia. China accounted for 18 percent of Brazil’s global exports. The most important export earning of Brazil is iron ore.
In 2014, around 47 percent of Brazil’s export of iron ore went to China. The fall in the steel output in China owing to overcapacity and bubble burst, will lead to drop in imports of iron ore by China and will impart a major impact on Brazil economy.
Similarly, China is the second biggest stakeholder of Russia’s oil export. Oil is the biggest export earning of Russia, sharing about 70 percent of its global exports. China accounts for 15 percent of Russia’s oil export.
Given China’s predominance in Russia’s oil export, drop in oil import by China will affect the Russian economy, which is already reeling under recession.
China is the biggest trade partner of South Africa. In 2014 it accounted for 10 percent of total South Africa export to the world. Iron ore is the second biggest item of South Africa’s export to world. China was the biggest destination of South Africa’s iron ore export. It accounted for 59 percent of South Africa’s iron ore export. The slump in steel manufacturing in China will unleash a major impact on South Africa’s iron ore export.
For India, BRICS’s significance is attached for its infrastructure funds. India needs US$ 1 trillion investment for infrastructure development. Setting up of the BRICS National Development Bank (NDB) ensures a great help for India.
India was running pillar to post to international financial institutions for long-term finance for its coal based power plants, but was ripped off. This was because World Bank, IMF and ADB were averse to provide fund for coal based power projects. Coal based power projects pose danger to clean energy.
Since 2012, World Bank did not sign any memorandum of understanding for coal fired electricity projects with its member countries. ADB was selective in supporting coal based energy projects.
However, India is not disturbed by the Chinese slowdown in the economy, unlike other member countriesof BRICS.. This is because the BRICS development bank is proving to be a boon for India at a time when the global financial institutions are in financial turmoil after the slump in European Union.
National Development Bank and Asian Infrastructure Investment Bank (AIIB) are synonymous in their objectives. Both were set up to provide fund for infrastructure projects in Asia.
NDB plus AIIB will pose a challenge to Bretton Wood institutes - World Bank and IMF. Bracketing NDM with AIIB, India is expected to have more clout in Asian Bretton Woods in regulating the funds for its infrastructure needs.
Rather than leaning towards bilateral negotiations, BRICS should now, be engaged more in damage control to pep up the economies of the member countries, and focus mainly on generating a common strong platform which can insulate the member countries from the economic recessions of developed countries and simultaneously facilitate the process of growth though intense collaboration between the member countries.