BRICS Summit 2023: Will adding more bricks to a divided house help?

Whether BRICS becomes the voice of the Global South or remains a divided house without any coherent agenda will be keenly watched

In 2016 during its BRICS presidency, India proposed to create a credit rating agency under the umbrella of the grouping to challenge the existing credit rating system dominated by the three global rating agencies India considers biased against developing countries. The Exim Bank prepared a concept paper, and CRISIL conducted a study. Still, no consensus could be reached as China opposed the proposal holding that a government-backed credit rating agency would not have any credibility and that BRICS should stay away from it. The idea has since been abandoned.

China also made a strong pitch for a free trade agreement among the five member countries during the same time in 2016 to remove tariff and non-tariff barriers, give play to comparative advantages and advance trade and investment liberalisation among the members. However, India didn't favour such a trade deal and put forward an agreement for better customs cooperation to reduce non-tariff barriers among the nations. Both proposals have now been pushed to the back burner.

The acronym BRIC was first used in 2001 by Goldman Sachs in their Global Economics Paper, "The World Needs Better Economic BRICs", projecting that the economies of Brazil, Russia, India and China would individually and collectively occupy far greater economic space and would be amongst the world's largest economies in the next 50 years or so.

As a formal grouping, BRIC started after the leaders of Russia, India and China meeting in St Petersburg on the margins of the then G-8 Outreach Summit in 2006. The grouping was formalised during the first meeting of BRIC foreign ministers on the margins of the UN General Assembly in New York in 2006. The first BRIC Summit was held in Yekaterinburg, Russia, on 16 June 2009.

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It was agreed to expand BRIC into BRICS by including South Africa at the BRIC foreign ministers' meeting in New York in September 2010. Accordingly, South Africa attended the third BRICS Summit in Sanya, China, on 14 April 2011.

BRICS brings together five major emerging economies, comprising 42 per cent of the world population, having one-quarter of the world GDP and 18 per cent share in the world exports.

While the combined economic fortune of the grouping is on the rise, there is substantial variation in the performance of the individual member countries. According to UNCTAD's latest BRICS Investment report, China's FDI inflows grew annually by over 10 per cent from 2001-2011 before falling back to 4 per cent from 2011-2021. The Russian Federation and India saw exceptionally strong annual growth rates for FDI inflows of about 30 per cent and over 20 per cent, respectively, from 2001 to 2011, but have since deteriorated to just over zero per cent and 2 per cent, respectively, in the last ten years. After a strong performance in the first decade of the 21st century, Brazil's annual growth in FDI inflows turned negative in the second decade, although with a recovery since 2015. "The trend in South Africa, which had a negative annual growth rate in FDI inflows from 2001-2011, ran counter to the general trend observed in the BRICS and posted an annual growth rate of over 25 per cent from 201 to 2021," the report said.

The initial hype surrounding BRICS was based on the assumption that these emerging economies would continue to grow rapidly and become major economic powers. However, the reality has been more complicated. Especially, the hope of rapid growth in Brazil, Russia and South Africa has not materialised. For example, while Russia's gross domestic product (GDP) growth averaged 7.1 per cent in 2001-2011, it slowed to 1.2 per cent during 2011-2021. Similarly, the increase in Brazil slowed down from 3.4 per cent to 0.7 per cent during the same period, while that of South Africa eased from 2.7 per cent to 1.5 per cent. However, India and China have held their fort, maintaining robust growth momentum since the inception of BRICS. India's GDP growth averaged 7.6 per cent during 2001-2011, easing marginally to 6.7 per cent during 2011-2021. Similarly, China's GDP growth eased from 10.2 per cent to 6.8 per cent during the same period.

At the 15th BRICS Summit in Johannesburg under the South African presidency that begins on Tuesday, the agenda item is an expansion of BRICS membership. As Business Standard reported on 29 June, Saudi Arabia, Indonesia, the UAE, Egypt, and Argentina have emerged as the top contenders for inclusion in the BRICS grouping.

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"An expanded BRICS will represent a diverse group of nations with different political systems that share a common desire to have a more balanced global order," said South Africa's President Cyril Ramaphosa on Monday.

Addressing the media ahead of prime minister Narendra Modi's visit to South Africa to attend the BRICS Summit, foreign secretary Vinay Mohan Kwatra said India has a positive intent and open mind regarding BRICS expansion. "There is considerable interest among many countries to associate themselves with BRICS. As you know, BRICS works on the modality and principle of consensus and all the BRICS countries have to have full consensus on how BRICS should be expanded, what should be the guiding principles and criteria of such expansion. Those are the subject matter of ongoing, current discussions between the Sherpas of the BRICS," he added.  

While India has reluctantly agreed to the expansion of BRICS, it has successfully pushed back against the Chinese proposal of a common BRICS currency. India's BRICS Sherpa Dammu Ravi on Monday said if BRICS countries are able to do more trade in their national currencies, it will be a first step towards building a common currency. "That's an aspirational goal, we should keep it there. But first we should start visibly and practically trade in our own national currencies. India has already done it with 18 countries and we are increasing the volume of trade through that mechanism," he added.  

While the existing BRICS grouping has not been able to deliver any substantial economic outcome except for the New Development Bank, economist Biswajit Dhar believes the need for a grouping representing interests of the developing country still exists. "Mere expansion of BRICS really doesn't matter. What would matter is whether these groups of emerging economies can get together and develop common positions on issues such as climate change, reforming the multilateral financial institutions, external debt, World Trade Organisation reforms keeping in mind the larger interest of the developing countries," he added.

The BRICS grouping is genuinely at a significant turning point. Whether it becomes the voice of the Global South or remains a divided house without any coherent agenda will be keenly watched.