Author: Parveen Kaswan (Follow for more updates)
At the first Bric summit in Yekaterinburg, Russia in 2009, then member states India, Brazil, Russia, and China expressed mounting discontentment with the inertia in the Bretton Woods institutions (the International Monetary Fund and the World Bank) and united to “advance the reform of international financial institutions, so as to reflect changes in the global economy.” Russia’s president, Dmitri Medvedev, said the main point of the meeting was to show that “the Bric should create conditions for a more just world order.” This sentiment, to reform the global economy has been a primary point of convergence for the group ever since and a common position around that to determine a replacement establishment..
BRICS now a gaggle of five emerging economies including Brazil, Russia, India, China and South Africa, have decided to fund their development bank with $100 billion. The reserves are geared toward financing joint development ventures, and are set to rival the dominance of the World Bank and the IMF.
“At the final stage of realization – the initiative to create a BRICS forex reserve pool – the size of its capital has been agreed at $100 billion,” Russian President Vladimir Putin said while opening the G20 Summit in St. Petersburg.
As head of Goldman Sachs Jim O’Neill back in 2001, coined the descriptor BRIC (Brazil, Russia, India, and China) to highlight the role of developing economies in world finance. Earlier it absolutely was thought of simply a virtual organization, now BRICS is a global reality. The term has taken on a life of its own, as much a symbol of the countries’ global political emergence as it is a sign of market dynamism.
The BRICS countries represent a considerable force in terms of the world’s finances. Trade within the group amounted to 16.8% of global commerce at $6.1 billion. Countries were ranked 8,9,10,11 in terms of GDP ranking in the last decade and now two of the first three top rankers in PPP terms are from BRICS. It was started outside the ambit of G-7, which were formerly the 7 largest and wealthiest (not intended as GDP, but global net wealth) nations on Earth. Now, within the current state of affairs, growth is drooping everywhere around the globe and the major contributors to world growth are China, India and Brazil. The acronym has come into widespread use as a symbol of the shift in global economic power, away from the developed G7 economies towards the developing world. It is estimated that BRIC economies will overtake G7 economies by 2027 and increased economic muscle among the BRICS has been matched by a louder voice across all areas of worldwide affairs.
IMF is dominated by G-7 nations and formation of a development bank will be a step forward to counter the western dominations on economic front. It has potential to become the engine of change at global level. Talks are also going on for new reforms at International Monetary Fund in terms of voting rights for developing nations but these talks will not be helpful for the group in larger perspective. So, this kind of equal & unified stand and common approach in bringing the contemporary reality in economic field and world order will be more helpful in projecting group as a global leader.
Japanese economy is contracting and EU’s growth is additionally stagnant. They are all latched with their demographic issues. In such scenario, it is not wrong if we will call China and India as the drivers of the world growth. The BRICS bloc of states is now an economic giant representing about 40 percent of the world’s population. It also holds huge chunk of foreign reserves and is responsible for a fifth of global gross domestic product.
According to initial statements the reserve pool of central bank money would be made available to emerging economies facing balance of payments difficulties or could be tapped to stabilize economies during crises.
In his latest interview, Jim O’Neill of Goldman Sachs stated :
“… I think is a fascinating idea that is being championed by India and, probably also by Brazil. However, it remains to be seen whether the Chinese really like this plan. At this point, it would be important for the BRICS countries to launch concrete projects if they want to be more than a club that is loosely tied together. They have already agreed on measures to facilitate trade between them and issued joint demands on some foreign and environmental policy topics. More can be done.”
Some critics are even taking them as a partnership between unequal. Here we need to look the development from a different perspective, in this era of globalization and rapid economic transition, when we are talking about bipolarity most of the times we are speaking in context of economy. As it is self evident today we are living in two block system, popularly referred to as developed and developing world. Being the members of developing world, it is the common interest which attracts these countries along and that makes them equal in their stand. Examples are often seen, when these countries are sharing same exchange in numerous international issues. The group that was started as a loose economic alliance, now slowly taking position towards a political cluster too. When we are talking in context of economic diplomacy, there are no ‘Zero Sum Games’, it is the ‘Positive Sum Game’ that most entities are targeting and same is true for BRICS countries.