All you want to know about- BRICS

BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. Originally the first four were grouped as “BRIC” before the addition of South Africa in 2010.

The BRICS members are all leading developing or newly industrialized country countries, but they are distinguished by their large, sometimes fast-growing economies and significant influence on regional affairs; all five are G-20 members.

BRICS summits

Since 2009, the BRICS nations have met annually at formal summits.

• India has hosted the BRICS conference in Goa in 2016.

Financial Structure

Currently, there are two components that make up the financial architecture of BRICS, namely, the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA). Both of these components were signed into treaty in 2014 and became active in 2015.

Why BRICS is important?

BRICS compared to world

• As of 2015, the five BRICS countries represent over 3 billion people, or 42% of the world population
• All five members are in the top 25 of the world by population, and four are in the top 10.
• The five nations have a combined nominal GDP is equivalent to approximately 20% of the gross world product.

Shared interests

• Reform the global governance architecture which is yet to reflect the changing global scenario where the emerging economies are playing a larger role.
• Work with the international community in keeping the multilateral trading system stable

 Economic crisis faced by different nations in the grouping

• Brazil is facing political and economic crisis while India and China are the fastest growing economies in the world.
• To sum up the interests of different countries inside the group varies. This is not a problem face by BRICS alone but other international institution also faces similar issues. (Eg G20. WTO)
• The slump in oil prices has affected Russia and Brazil’s growth and
• Russia economy was further affected by western sanctions over Ukraine crisis
• Chinese manufacturing saw its weakest growth in years, while India, the world’s fastest growing economy, has faced a contraction in IIP figures.
• The South African Finance Minister said his economy was in a “crisis” this year, with revised growth estimates falling below 1 per cent, and 26 per cent unemployment, fuelling violent protests.

India and BRICS – Points of contention

• China: The China and India has their own fair share of issues such as China’s assistance to Pakistan and Arunachal issue and India’s shift to the U.S.’ strategic corner on the South China Sea.

• Russia: Russia’s shift away from an exclusive relationship with India, ambivalence on defence ties with Pakistan consistent with its new dependence on China is another factor that is loosening some of the mortar between the BRICS countries.

• Brazil and South Africa are also known to have reservations on India’s bid for the NSG membership.

The issues with BRICS free trade pact

• China has recently proposed to bring in BRICS FTA
• BRICS FTA will mainly benefit the industrialised countries with the bloc
• South Africa and the African continent have so far been mainly producers of primary products, but want to retain the policy space for industrialisation to reap the benefits of the ‘Fourth Industrial Revolution’ — meaning, industrialisation using computerisation and other latest technologies according to South African Industries minister
• Structural Imbalances: South Africa mainly exports raw materials to China and imports fully-manufactured items from that country. If such a scenario continues, it will not help create value chains that will support industrialisation in South Africa
• The highly ambitious FTA agreement would only cater to the interests of some but won’t have broader developmental outcomes

Issue in BRICS summit

• On-going tensions with Pakistan, especially regarding terrorism
• The strain in India’s ties with China : China’s opposition to India’s membership at the Nuclear Suppliers group, and blocking the designation of Jaish e Mohammad leader Masood Azhar as a U.N. sanctioned terrorist
• Slowing down of economies in Brazil and South Africa

Outcomes of BRICS summit Goa

1. BRICS Goa declaration

• The 8th BRICS summit ended here on Sunday with the adoption of the Goa Declaration which pledged opposition to terrorism.
• Reflecting international concern, the Goa Declaration of the BRICS summit, which concluded here on Sunday, pointed out the need for countering the Islamic State.
• The declaration called for resolution of the civil war in Syria.
• The final statement also called for all nations to counter radicalism, and block sources of financing international terrorism

2. 2. Credit rating agency: The five-nation group BRICS agreed to set up an independent rating agency based on market-oriented principles, to further strengthen the global governance architecture.

3. List of MoUs signed by BRICS

• MoU for Establishment of BRICS Agricultural Research Platform
• MoU on Mutual Cooperation between Diplomatic Academies
• Regulations on Customs Cooperation Committee of the BRICS

Prelims Perspective

Previous year question UPSC CSP 2016

Consider the following statements

1. New Development Bank has been set up by APEC.
2. The headquarters of New Development Bank is in Shanghai.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Mains Perspective

Model questions

• BRICS is a grouping of countries that are neither geographically united nor economically similar. In this context analyse the future of BRICS.

Sources: The Hindu – http://www.thehindu.com/business/Industry/brics-pact-may-polarise-nations/article9212019.ece

The Hindu – http://www.thehindu.com/news/national/tensions-with-pakistan-overshadow-brics-summit/article9221064.ece

Wikipedia- https://en.wikipedia.org/wiki/BRICS

https://en.wikipedia.org/wiki/New_Development_Bank

https://en.wikipedia.org/wiki/BRICS_Contingent_Reserve_Arrangement