In the past few decades, some large economies such as Brazil, Russia, India, China and South Africa (BRICS) have acquired a crucial role in the world economy as producers of goods and services, receivers of capital, and as potential consumer markets. The BRICS countries have some of the world’s fastest growing economies and are drivers of the global recovery process. They are playing a formidable role in shaping macroeconomic policy after the recent financial crisis, even at the G-20 forum level.
Brazil, Russia, India, China and South Africa share the common objective of boosting their economies by bringing in foreign capital and aligning their interests and values. At the fourth BRICS summit, held in New Delhi in March 2012, they discussed the global economic condition, reform of financial and regulatory institutions and establishing a BRICS Development Bank.
The BRICS nations account for 45% of the world’s population, 25% of global GDP and 50% of recent global growth. Therefore when global economic issues directly affect them, the rest of the world feels the impact.
Among the BRICS, China has been first and India second in terms of economic growth in the current decade. India is a strong service provider with a growing skilled and highly skilled workforce. India is also a more domestic-demand driven economy and as a result it has recovered faster from the 2008 financial crisis than most of the other market economies.
India and Brazil both regard inclusive development as necessary to meet their developmental challenges and to strengthen their cooperation. India-Brazil cooperation is already visible in healthcare. In 2007, Brazil broke a patent on an antiretroviral drug produced by Merck Pharmaceuticals in the wake of rising prices. Indian companies were the only producers of the generic version of the drug, and a Hyderabad-based company provided Brazil with the active ingredient to produce the drug. Recognizing such synergies, the countries have invested US$1 million each in the joint research of common diseases through the Indo-Brazil Science Council.
Progess in India’s relationship with Russia has been marked by two events: Russia’s completion of two nuclear reactors at the Kundankulum plant in Tamil Nadu and the subsequent easing of the visa regime for Indian and Russian businesspeople. But the association with the Russians became fragile after the Indian government signed an US$11 billion defence procurement deal with the EU.
Relations with China
Looking at India’s relations with China, we see that China has emerged as one of the largest lenders to Indian companies. With US$3,200 billion in its reserves, China has a lot to invest and Indian companies are reaping the benefits. For example, a consortium of Chinese bankers refinanced foreign currency convertible bonds worth US$1.18 billion for Reliance Communications. Reliance Communications has said that due to international financing, the average interest cost savings on the loan are worth US$100 million per year.
But this does not present a rosy picture for India. India must realize that it needs to find new avenues of collaboration and exports to reduce the impact of China on its domestic economy. India must sign more regional trade and free trade agreements with China, specifically focusing on information technology, information technology enabled services and the services sector, to continue as one of the best performing BRICS economies.
India needs to continue having healthy trade and economic relations with the other BRICS nations so that it can achieve its desired growth projections and help to achieve the BRICS nations’ goal of accounting for 47% of global GDP by 2050.
Future global impact
BRICS was constituted as an economic forum to consolidate the economic strength of the BRICS nations, so that the economic synergies resulting from the association could help fuel the growth of the global economy. BRICS’ experience could also be applied to help mould the future of other developing nations.
With the exception of Brazil, which has had only modest growth rates in recent years, the BRICS nations have been gaining weight and importance globally and within sectors. Theoretically, in a few years the BRICS countries could represent a fifth of the global economy and in two decades they could overtake the G7. In fact, we can say that developing countries’ share in global goods and services exports and GDP will certainly rise above current levels because of their demographic importance and the growing dissemination of technology and direct investment.
The economic potential of the BRICS countries remains above average and their market situation is expected to get better in the medium and long term. This in turn will further deepen the global influence of the BRICS countries on the global economy.
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