Thursday, 9 October 2014

BRICS – Game Changer in 21st Century?

The 6TH BRICS summit in Brazil ended with quite a few concrete outcomes such as the founding of the BRICS New Development Bank. This left many observers pondering whether this association of these countries of growing economic muscle could be a serious competition to the G8. It is obvious that one can’t question the supremacy of the BRICS  in terms of population, landmass, and economic size as compared to other countries of the world. However, these countries (Brazil, Russia, India, China and South Africa), until the formation of BRIC in 2001 with South Africa a late entrant in 2010, had been largely muddled along outside the global market economy; and their economic policies had often led to disastrous results. Each needed to experience deep and critical crises that would propel them onto a different and faster mode of development. When once they got onto the right track, they tapped into their vast unrealised economic strength with their total GDP of close to $14 trillion nearly equalling that of the United States.

But now the emerging question is whether the BRICS has the capacity to convert itself into a formidable force to influence the world economy and sustain it for long. In reality, none of the countries is fully accepted as capable leader even in its own region. India and China continue to have resentments and brushes with each other on matters like J&K and Tibet. Similarly, Russia is constantly involved in tussles with the west and US, making its economy more susceptible to western sanctions. South Africa on the other hand, doesn’t yet have the population and the growth potential as the other four to be the ‘equal’ member. Cohesiveness is also an issue the BRICS face as a unit. Russia and Brazil are way ahead in per capita income beating India and South Africa. China, meanwhile, dwarfs the other BRICS, whose combined economic size isn't expected to catch up to that of China in the coming years.

But does this mean BRICS cannot become a good competitor to the other international associations anytime soon? Answer to this can be given in two parts. No and Yes.

BRICS can give other associations a run for their money, as they enjoy great benefits from their abundant workforce, ability of higher productivity, and a competitiveness to catch up with their well off rivals. Over the past years, these countries have undergone great transformations. China has become the world’s manufacturing hub, Brazilian and South African beer companies have become leading global brewers. BRICS can be credited to have performed far better than some other developed markets with their growing GDPs. So of course, it makes perfect sense for investors to not ignore such a huge, successful part of the global economy. Research and development too in the BRICS is paving the way for increasingly high-value-added production. Therefore, together they could dominate the global economy later this century the way Europe and the United States once did.

However, the BRICS are going through a rough patch right now, which is why the answer to the question of their becoming a formidable force cannot always be in affirmative. While, the spread of democracy and free markets in much of Americas and much of Europe is impressive, two of the five BRICS have been laggards in this area. In the rest three countries, political checks and balances still remain in their infancy. Although we do read about new fancy airports in China and how Russia can bulldoze entire neighbourhoods at its will, their political conditions rarely give them an edge. Even for democratic members like India, Brazil and South Africa, politics are often overwhelmed by corruption, lack of political will, crippling crime records and political scandals.

The consequential scenario thus holds the future of BRICS in a mid-way. Some tailwinds that have benefitted the BRICS may turn into gales. For instance, these countries have low budget allocations to military spending that might have benefitted them relatively to the higher military budget allocations of major countries like U.S.A., allowing them to allocate more money to developmental activities such as improving health and education. Yet, there may be as serious change or disturbance at a hand away distance if conflicts broke in the Indian subcontinent, unfriendly neighbours posing nuclear threats or internal socio-political crisis. In fact, the latest reported happenings of Economic malpractices in China, the upheavals of the Arab spring and power blackout in India are the red flags that show the dramatic impact of sudden events. So, sure BRICS will have to face tough adjustments to meet the heavy growth expectations and the ever increasing demands of their rapidly growing populations.  Let us hope BRICS crosses these roadblocks and embarks upon its endeavour to put its stamp on the 21st century.

C. Krishna Priya 

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