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LUCID MAINS CURRENT AFFAIRS 2018

  1. BRICS

WHY IS THIS IMPORTANT FOR MAINS?

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India and or affecting India’s interests.

WHAT IS BRICS?

  • BRICS is the acronym coined by British Economist Jim O’Neill meant for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. Initially first four were grouped as "BRIC", before the induction of South Africa in 2010.
  • The BRICS members are known for their significant influence on regional affairs; all are members of G20.
  • Formally started in 2006 when the first BRIC meeting was held for the mutual development of member countries and since 2009, the BRICS nations have met annually at formal summits.
  • South Africa hosted 10th BRICS summit in July 2018.
  • The theme for the 10th BRICS Summit is: “BRICS in Africa: Collaboration for Inclusive Growth and Shared Prosperity in the 4th Industrial Revolution”.
  • To strive towards the creation of an inclusive society and global partnerships that will bring prosperity to all humankind

WHY THE WORLD NEEDS BRICS?

  • The main reason for co-operation among the BRIC nation was the financial crisis of 2008. The crisis affected developed market economies but developing countries were growing at 6% or more. The growth rate of the global economy depended much on the developing economies.
  • The crises also raised skepticism on the dollar dominated monetary system.
  • The leading role of the Group of Seven (G7) and the Organisation for Economic Cooperation and Development (OECD) is no longer undisputed.
  • Most multi-lateral institutions are west dominated. The US and Europe are over-represented in the IMF and the World Bank and together with Japan, they control most regional development banks.
  • This imbalance has been especially clear during the recent global financial crisis when the need for participation by non-G7 countries became evident.
  • This is why BRICS summits are so important. These meetings provide a unique forum where non-OECD leaders can discuss global challenges and co-ordinate their actions within and outside global institutions.
  • The small size of the club and the absence of OECD partners help in shaping the discussions at the summit.

OBJECTIVES OF BRICS

  • The focus of the organisation is to foster strong economic collaboration, improving political and security co-operation.
  • Democratization of the United Nations, including expansion of the UN-Security Council.
  • Reform of global financial governance.
  • South-South framework for cooperation.
  • To achieve regional development.
  • Assisting developing countries in gaining an advantage in trade and climate change negotiations.
  • Enhance market access opportunities and facilitate market interlinkages.
  • To promote mutual trade and investment and create a business-friendly environment for investors and entrepreneurs in all BRICS countries.
  • Strive for, inclusive economic growth to eradicate poverty, address unemployment and promote social inclusion.
  • Commitment to cooperate for strengthening multilateralism, the rule of law and an equitable international order.

ACHIEVEMENTS OF BRICS

  • The New Development Bank (NDB): a multilateral development bank operated by the BRICS states. Primary focus of lending will be infrastructure projects with authorized lending of up to $34 billion annually. The idea of NDB was proposed by India.
  • BRICS Contingent Reserve Arrangement (CRA) providing protection against global liquidity pressures includes currency issues where members’ national currencies are being adversely affected by global financial pressures.
  • Both are seen as a competitor to the International Monetary Fund(IMF) and along with the New Development Bank is viewed as an example of increasing South-South cooperation.
  • BRICS payment system-BRICS countries intend to create their own multilateral financial system that would be similar to SWIFT.
  • The annual BRICS summit provides a platform to the leaders to share their concern and thoughts regarding geopolitical issues.

CONCERNS REGARDING THE BRICS

  • Competition among themselves to be regional powers. Both India and China want to dominate the Asian neighborhood.
  • Different forms of governance- Brazil, India, South Africa are democratic countries while Russia, China are authoritarian regimes
  • Trade conflicts Brazil and Russia are commodity exporting countries and thus benefit from high commodity prices while India and China are commodity importers that benefit from low commodity prices.
  • Territorial Issues – China and India have outstanding territorial issues to resolve. Also the Belt and Road Initiative is being opposed by India because it transgresses into Indian Territory.
  • China spearheads three other major initiatives in this region – Belt and Road Initiative (BRI), Asian Infrastructure Investment Bank (AIIB) and SCO. 
  • The BRICS have little in common. The Chinese economy is 28 times the size of South Africa’s. Income per person in India is much less than in Russia.
  • China and Russia are members of UN Security Council- the others are not. Both are not in favour of expansion of the UNSC.
  • It maintains a low profile on security issues. BRICS will never attempt to make the group into a traditional security framework.

WHY BRICS IS IMPORTANT FOR INDIA?

  • BRICS provide a great alternate for India to build its global profile.
  • BRICS provides platform for enhanced engagement between India and China.
  • Major focus of India’s policy towards BRICS is co-operating on the economic front. India is also the fastest growing economy of the bloc which can be beneficial to other members.
  • India being a service oriented economy and other members strong in manufacturing, can complement each other.
  • Use Brazil and South Africa as a gateway into South America and Africa.
  • India’s concerns:
    • However, India has been unable to get BRICS countries to openly support its fight against terrorism. Except for the Xiamen summit, there has not been an emphasis on terrorism emanating from Pakistan.
    • No decision was taken to set up the BRICS credit rating agency that India favors. BRICS countries claim that the existing ones- Standard & Poor's (S&P), Moody's, and Fitch- do not rate the developing countries fairly. Russia claims its ratings were reduced deliberately after the Crimean crisis.

WHAT IS THE RELEVANCE OF BRICS?

  • The five BRICS countries represent over 3.1 billion people, or about 41% of the world population;
  • Four out of five members (excluding South Africa at #24) are in the top 10 of the world by population.
  • As of 2018, these five nations have a combined
    • Nominal GDP of US$18.6 trillion,
    • Combined GDP (PPP) of around US$40.55 trillion (32% of World's GDP PPP)
    • 2% of the gross world product
    • An estimated US$4.46 trillion in combined foreign reserves.
  • Together, they account for 45 per cent of the increase in world growth since 2009, driven mainly by China and India.
  • They also account for 30 per cent of the World GDP (Gross Domestic Product).

 

WAY FORWARD

  • China’s dominance is a reality even as the grouping asserts the sovereign equality of all members.
  • Resolution of Doklam Standoff prior to Xiamen summit shows both are willing to accommodate each other.
  • Geo-strategically, BRICS are now represented on all continents of the global south
  • In bilateral and regional agreements, the BRICS emphasize south-south solidarity and cooperation in contrast to western dominance.
  • BRICS provides an opportunity to India to access Africa and South America.
  • Each one of the parties needs the other to prosper.
  • BRICS is helping drive what could be the first period of sustained movement towards greater global income equality in two centuries.
  • BRICS will continue to be an influential voice as long as its convergences prevail over its divergences.

 

BRICS PLUS

  • Introduced at the Xiamen summit in 2017 to enhance cooperation with various developing nations. China invited Egypt, Kenya, Tajikistan, Mexico, Thailand.
  • South Africa emulated it, arranging the attendance of top-level representation of five nations of its choice: Argentina, Jamaica, Turkey, Indonesia and Egypt along with an outreach to Africa program.
  • The BRICS outreach to Africa began at the last summit hosted by South Africa, in 2013.
  • The precise role of “BRICS Plus” countries will take time to evolve.
  • Immediate benefit is the immense opportunities it provides for networking among leaders.
  • A large number of bilateral meetings took place on the summit’s sidelines.

 

JOHANNESBURG SUMMIT 

Leaders of the BRICS emerging economies gathered in Johannesburg for a three-day meeting focused on the threat of a US-led global trade war. 

'Johannesburg Declaration’ was adopted by consensus.

  • Commitment to the principles of mutual respect, sovereign equality, democracy, inclusiveness and strengthened collaboration.
  • Reject the growing unilateralism and instead reiterate their commitment to the strengthening of multilateral institutions.
  • Stronger intra-trade within member states.
  • Leaders reaffirmed their commitment to fully implementing the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs)
  • Called upon all countries to fully implement the Paris Agreement including the principles of common but differentiated responsibilities.
  • Agreed to strengthen BRICS cooperation in energy, especially in transitioning to more environmentally sustainable energy systems.
  • Reaffirmed their support for the establishment of the BRICS Agricultural Research Platform (ARP) initiated by India in 2016.

NEW AREAS OF BRICS CO-OPERATION

The new areas of BRICS cooperation as proposed by South Africa are as follows:

  • Establishment of a Working Group on Peacekeeping;
  • Establishment of a Vaccine Research Centrefocused on research and development and vaccine innovation.
  • Establishment of a BRICS Gender and Women’s Forum– intended as a dedicated track for gender and women’s issues.
  • Establishment of a BRICS Tourism Track of Cooperation.
  • Leveraging the Strategy for BRICS Economic Partnership towards the pursuit of Inclusive Growth and Advancing the 4th Industrial Revolution.