India's new prime minister Narendra Modi succesfully presented his ideas of national development on his first international summit. Its most important outcome: a common BRICS Development Banc that could challenge the global financial order.
The 6th annual summit of the BRICS nations, comprising the emerging economies of Brazil, Russia, India, China and South Africa, was held in Fortaleza in Brazil. The term BRICS was coined about a decade ago by the then chief economist of Goldman Sachs who assessed that these economies would play a growing role in the global economy, both individually and collectively. Today these economies account for about a quarter of the world GDP and about 40 percent of the world population.
The annual summit brings together the heads of states of these economic powerhouses and inevitably raises the question of their ability to stitch together a regional grouping which could provide an alternative structure to the world economic order. Dissatisfaction and frustration about their lack of power in running of these structures, despite their economic weight, was an important factor during the summit.
A Forum for India's Interests
India is one of the emerging economies in today’s world. To become a global player it is vital that India works hand in hand with other developing economies to challenge and combat not only the hegemony the United States of America controlling the global economy, but also the Bretton Woods institutions: the IMF and the World Bank. The BRICS (formerly known as BRIC before South Africa joined in 2010) is a forum, in which the five rapidly developing economies meet and discuss various ways they can cooperate. Since 2009 the BRICS summit has been held annually in different cities of the BRICS nations.
The 6th BRICS summit was held in the city of Fortaleza in Brazil from July 14th to 16th. The summit was the first international summit to be attended by Mr Narendra Modi. The BRICS conference set an important benchmark in determining how India will cooperate with the rest of the developing economies and was seen as a forum which would help to put forward India’s interests and opinions.
"The Hindu" says about the BRICS that,
“Apart from the structured agenda for BRICS, the countries, representing a powerful bloc with $24 Trillion GDP and 40% of the world’s population, will discuss international issues like the WTO negotiations and the situation in Iraq and Syria. Apart from South Africa, all the countries have been affected by revelations on the U.S. NSA’s surveillance operations, and have criticised the U.S. for them. Part of Mr. Modi’s challenge, this early in his tenure, will be to ensure the grouping doesn’t give the impression of an “anti-western” coalition, ahead of his big visit to the U.S. in September.”
Focus on Technology and Tourism
The BRICS nations, which were once criticised for not having a common ground, have proved throughout this summit that notwithstanding bilateral differences over certain issues, a healthy relationship between nations can still be formed through cooperation. According to "the Pioneer",
“At a time when the BRICS grouping has been criticised for its inability to find common ground, Prime Minister Narendra Modi's successful meeting with Chinese President Xi Jinping shows that a strong relationship based on cooperation is possible even between two competing nations that don't see eye to eye on several crucial issues. The two leaders met for the first time in Fortaleza on the sidelines of the sixth annual BRICS summit and exchanged notes on a wide range of subjects. But even as they discussed strengthening economic ties, Prime Minister Modi emphasised the importance of an early resolution of the boundary dispute, which has seen little progress even after 17 rounds of talks. Instead, repeated Chinese incursions have disturbed peace and tranquillity along the Line of Actual Control. China's relationship with many of its other neighbours has deteriorated in the recent past due to Beijing's aggression in the South China Sea. In India's case though, it has signalled a willingness to resolve the long-festering boundary dispute. This is crucial to a robust future relationship.”
Modi was also praised for keeping his points and issues precise and to the point. He presented the idea of integrating his ideas of national development with the BRICS agenda. This was seen as something very unique and new to the summit. According to an article in the "Economic Times",
“Modi's interventions at the BRICS summit were forthright and crisp. It was noteworthy that he dwelt at substantial length on Afghanistan, where the situation may develop dangerously for Indian interests. What was new was the clear desire to dovetail the BRICS agenda with the developmental agenda Modi has set before the nation. Thus the focus in his address to the plenary to BRICS cooperation on harnessing technology for e-education and e-health programmes, clean energy, tourism and the youth.”
Another article in the "Indian Express" says that,
“On a range of controversial global issues, including climate change, green growth, global trade and cyber security, Modi took forward-leaning positions that are in tune with India’s interests.”
The BRICS Development Bank: A New Alternative
One of the most important features of this year’s BRICS summit, which could eventually change the global financial order, was an agreement between the BRICS nation to set up a BRICS Development Bank and a currency stabilisation fund to be called the "New Development Bank" (NDB) and "Contingency Reserve Arrangement" (CRA). The NDB would have a subscribed capital of US$ 50 billion, the CRA of US$ 100 billion and will supplement the World Bank and IMF, which have been dominated by the US and Europe. The BRICS leaders stated that these new institutions would be supplementing the Bretton Woods institutions.
The emergence of these new institutions could nevertheless force the World Bank and IMF to introspect and give more say to the emerging economies as frustration at their inability to accommodate the growing ambitions of these countries was a major factor in bringing them together.
Modi was praised for working hand in hand with the rest of the BRICS nations and ensuring that the decision making structures do not fall under the influence of the strongest nation amongst the BRIC nations, as the overarching weight and influence of China in the global economy cannot be ignored. The "Indian Express" mentions that,
“The BRICS Development Bank, the arrangements for which were finalised at the summit, must be viewed from this angle: not as a counter to the World Bank but a complementary institution that will provide additional funding and new options for the economic development of emerging nations. India worked with other members of the forum to ensure that the bank’s decision-making structures are equitable and do not fall under the domination of the strongest power among them, China. Welcoming the expansion of the “horizontal influence” of the BRICS, Modi asked the members to seek greater “vertical cooperation” by strengthening bonds at the “sub-national” level among the members.”
While a good beginning was made at the BRICS summit, the challenges will continue as the five countries are inherently diverse in terms of their political ideologies and structures as well as economic and cultural systems. The slowdown in their economies will be an additional obstacle to overcome. It is, however, hoped that their common economic interests lead to a sustainable growth of the new initiatives.