Mainstream, VOL LII, No 32, August 2, 2014
Interdependence Among Brics Nations
Saturday 2 August 2014
by Asif Nazar
The world is as vulnerable to liquidity shocks as it was earlier. There is no foreseeable escape at present. But a grouping of nations based upon strength and conviction is the need of hour. These groups may or may not be as cohesive as groups formed by the developed nations but could be as determined and professional as groups representing developed economics. The will-power and determination of such groups may act as shields during crises. BRICS is one such group, though the experts’ opinions on terming BRICS as a group differ. Such groups help in reducing the dictate of institutions like the IMF. Further the member-nations of BRICS—Brazil, Russia, India, China and South Africa—have some-thing to offer to one another. Brazil’s strength lies in commodities whereas Russia is endowed with huge reserves of oil and gas; India is an emerging knowledge-led economy; China dominates in manufacturing and export of merchandising goods; and South Africa possesses massive mineral reserves. The unique strengths attributed to these nations make BRICS an interdependent platform.
Wherever there is interdependence, chances of equality increases. This is a good sign for the longevity of the group. Interdependence among the nations could be the strength of the group. But the similarity ends here. The group consists of China with economic prowess to influence the group dynamics. Any major differences and suspicions among the member-countries may prove detrimental to the health of BRICS. So negotiated settlement based on the principle of equality among the member-countries will help in guarding any ill-will. Another important task will be to appreciate political differences and not to interfere in the members’ domestic issues.
THE term BRIC was coined in 2001 by Goldman Sachs economist Jim O’Neil to group together the four fast-rising economies. South Africa joined the group in 2011. The nomenclature is based on the fact that the group has common characteristics of emerging markets that represent half the population of the world. The similarity ends here. But the Sixth Summit at Brazil is witness to the objectivity and focus of the group. It is progressing on the path it has chosen. The proposed Development Bank and Contingency Reserve Arrangement, an outcome of the Fifth Summit at South Africa, is a reality now.
Further, the subscribed capital for the Bank will be contributed equally by all five member-nations. This gesture of mutual respect for one another in the group is bound to provide the much needed breath of solidarity among the member-nations. Thus a term coined to explain the concept of emerging markets is now rising as a force worth watching and appreciating.
Once the cushion is ready to absorb the flight of foreign capital, the BRICS countries’ economies will not be dictated by the whims and fancies of the advance economies. But the member-nations will have to appreciate the interdependence and resulting responsibility of equality. In the absence of a binding glue, the group may not achieve its stated objectives. Further, the boundary dispute between India and China, if handled with lack of sensitivity, may affect the effectiveness of the group.
There is good news for other developing economies. They can view the BRICS Bank as an alternative to the IMF and World Bank, and may bank upon this New Development Bank. Even if they deal with the IMF, their bargaining power will increase due to the presence of the BRICS Bank. A new pattern has emerged and similar groups may be formed to combat the volatility of the economies and ensure economic stability of the other developing nations.
Asif Nazar, an ex-SDE, MTNL, Delhi, is a PGDM (Gold Medalist), IMI Delhi, B.Sc. Engg. (Electrical)