BRICS scenario and the world order

Despite the current world economic order being fraught by crises, the so-called BRICS have done well economically. The Economist Intelligence Unit (EIU) predicts that by 2022 the BRIC countries will dominate international retail market by becoming four of the six largest retail markets. As per the report, by that year the Chinese retail market will be worth $8.3 trillion. The study further suggests India will account for $4 trillion of sales, Russia with $1.5 trillion and Brazil accounting for $1.2 trillion of sales. Though some of the reports in media cast doubt over the growth potential of the grouping, it appears that the countries unless some drastic downward takes place in their development trajectory will be robust in their growth, which in turn will have global implications.

Hot topic: BRICS

This year witnesses some of the important developments in international politics. This month, China will witness a leadership change at the top level after a decade with Xi Jinping most likely replacing Hu Jintao as the leader of the country. Though some highlighted cases of corruption appear to impact the image of the ruling establishment, the power transformation to the next level of leadership is likely to be smooth. Early this year Russia witnessed change of leadership with Vladimir Putin replacing Dmitry Medvedev as the country’s President. In the other end of the spectrum, the electorate in the US last week decided to give President Obama another term at White House. Will these developments impact international politics? How the BRICS countries will be impacted by these developments? And what will be/should be their future of course of action? There are many possibilities which need further study.

The BRICS have lost some of their momentum in past few months, but it would be an exaggeration to write an obituary to the grouping. Some of the recent writings in well-known magazines like the current issue of Foreign Policy have predicted that the grouping is gradually losing its sheen. The reasons given include: the grouping has no coordination among the members; energy scarcity will drag down the economy of these countries particularly India and China; the countries will gradually have to confront shortage in workforce and increase in aging population; and finally the West will gain momentum due to developments in technology and rise of a skilled workforce in these countries.

There are some elements of truth in these findings but they cannot be taken as absolute. There are many arguments which can be contradicted. For instance, the argument that the bilateral trade between the countries is faltering may not be substantiated by data. Overall bilateral trade between have increased between these countries. For instance, in the period 2011-2012, the bilateral trade between India and Brazil registered growth of 34 percent.

Energy security will be a big issue for the member countries particularly India and China in coming years. Reports suggest by 2025 the BRIC countries will account for nearly 38 percent of global primary energy demand, up from 27 percent in 2005. While countries like Russia and Brazil are better placed to meet energy demand, India and China are not blessed with rich energy resources. The rapid industrialisation and the faster rise in the middle class in these two countries will gear energy demand upwards. The oil supplier countries from the Gulf have increased the production but the rising domestic demand in these countries has impacted their export capacity. About twenty percent of India’s energy need is met by Saudi Arabia. But the increasing rate of energy consumption will move the countries India and China to search for alternatives. There can be a possible format of cooperation between the BRICS countries to meet these challenges. Russia and Brazil are rich in energy resources. There are bilateral arrangements between the BRICS countries on oil and gas, which can be further strengthened. The recent offer of Russia to India to explore energy resources in Madagan-2 field in the northern part of the Sea of Okhotsk is a positive development, which needs to be further extended to other oil and gas fields. India and Brazil have bilateral trade arrangements on crude oil, which can be further expanded. China has pursued a vigorous policy to import oil and gas from Central Asian countries and other regions. Development of a coherent policy approach between these countries on energy security will help them meet energy challenges. Such mutual energy cooperation will further help development of coordinated approach in other areas with international ramifications.

The BRICS central bank is yet to be materialised. The grouping proposed to establish a new development bank to support financing of long-term infrastructure projects in developing countries. The developing countries find it difficult to get loans from international financial bodies like World Bank and International Monetary Fund to fund development projects like roads, railways, electricity. The June 2012 the grouping established a working group aiming at pooling resources in terms of foreign exchange reserves of $240 billion to protect members from short-term liquidity pressures. These ideas have not yet materialised. The non-establishment of bank is perceived in many quarters as the weakness of the grouping and their faltering economic situation.

The BRICS provided an alternate platform for discourse on international politics. It played a crucial role in international decision making environment whether at G-20 or at the United Nations. Its weakness or failure will weaken the prospects of multilateralism in deciding critical international issues like climate change, reform of international bodies, peace and stability in conflict situations like Afghanistan. The new Chinese leadership will have to play a crucial role to bring synergy in the grouping. The role of China in maintaining peace and stability in Asia-Pacific and in the world will be critical in coming years. And China’s neighbours India and Russia, along with players like Brazil and South Africa, will have to develop a coordinated agenda for peace and development not only for themselves but also for other parts of the world.

Dr. Debidatta Aurobinda Mahapatra is an Indian commentator. His areas of interests include India-Russia relations, conflict and peace, and strategic aspects of Eurasian politics.

All rights reserved by Rossiyskaya Gazeta.