Will PM Modi’s magic work... Or will Brics go the Saarc way

Since 2001, when the chief economist of Goldman Sachs, Jim O’Neill, coined the phrase: Bric and forecast that the emerging markets economies would grow faster and play much greater role than the developed countries and in 2010 when Bric took South Africa on board and became Brics, this five-member transcontinental grouping has grown. With the combined nominal GDP that can rival the GDP of the EU and the US, it has the economic, political and military muscle to be reckoned with. The size of the nominal GDP of China, India and Russia is equal to the GDP of Italy. China has become the second largest economy in the world. Notwithstanding the sanctions imposed on Russia by the US and the EU for its action in Ukraine, Russia still matches the American nuclear warheads. Two Brics members: Russia and China are members of the UNSC and other two: India and South Africa are knocking at the doors for entry; sooner than later, they might get in.

In spite of these strengths, the group has not been able to assert at the international financial institutions like the World Bank and the International Monetary Fund and force the much-needed redistribution of voting rights. The US and the EU, with Japan, can virtually block any restructuring. However, with the establishment of the New Development Bank and Contingent Reserve Arrangement, a new beginning has been made which has the potential to make a dent, in coming years, in the financial stranglehold of the Western powers. Regrettably, this is the only tangible thing Brics have produced in the last 15 years!

This disappointing record breeds cynicism; many feel, Brics is going the Saarc way, i.e. huge potential but very little concrete result. Brics members have little in common and follow their own priorities. Both Brazil and Russia are exporters of hydrocarbons while China and India are net importers. Brazil and India are functioning democracies; China and Russia aren’t. Brazil whose two Presidents have lost their job in corruption scandals is facing the worst recession of recent years. South Africa is also witnessing economic and political crises. Russia bombing in Syria would like to project itself as a mighty global player of Cold War era. But, economically, it is in a dire straight. American and European sanctions, post-Crimea annexation, and continuing low prices of crude oil and gas are hitting its economy hard; people are feeling the pinch. The short-sighted policies of the US and EU are pushing Russia into China’s embrace. China’s economy is facing sharp decline; over capacities, burgeoning unemployment, shrinking markets and widespread resentment caused by President Xi Jinping’s robust anti-corruption drive are major concerns. After growing at the double-digit rate for three decades, its economy might grow at a modest rate of four-five per cent this year.

In this rather gloomy scenario, India remains a bright star whose economy will be growing at over seven per cent; it has also emerged as the most favoured FDI destination. India needs trillions of dollars to transform its creaking infrastructure. It must create millions of jobs for the impatient and aspirational youth. Mr Modi’s grand initiatives: Make in India, Digital India, Startup Konnect, Smart Cities, industrial corridors, bullet trains and green energy projects can transform India. They also offer investment opportunities to Brics members.

China whose GDP and foreign exchange reserves are bigger than all the other members of Brics put together is obviously the main driver. Its much hyped “One Belt, One Road” project is an ambitious and imaginative initiative to utilise China’s unutilised capacity and foreign exchange reserves to find markets for China’s products, machinery and services and enhance its political and economic clout in the counties which join OBOR. Asian Infrastructure and Investment bank (AIIB) launched by China, which has attracted over 30 Western countries despite American reservations underlines China’s unmistakable economic clout. Thanks to this, international reaction to China’s increasing assertiveness in the South China Sea and defiance of the verdict of the Permanent Court of Arbitration in favour of the Philippines has remained rather muted.

Saarc is almost defunct. And Brics won’t blossom unless China and India can overcome the trust deficit. At the Asean Summit, Mr Modi advised the Chinese leadership, without naming it, to be sensitive to others interests and abide by the international laws. In the bilateral context, while the Sino-Indian trade, investment and exchanges multiplied, China’s blind support of Pakistan, blocking the inclusion of Masood Azhar in the UN terrorists list, foiling India’s entry into Nuclear Suppliers Group and $46 billion worth investment in China-Pakistan Economic Corridor which passes through the part of Kashmir ceded to China by Pakistan have touched a raw nerve in India. Many strategic analysts believe that China is against India’s rise as a major world player and wants it to remain bogged down in South Asia, particularly with its problems with Pakistan.

The eighth Brics summit in Goa from October 15-16 will give India an opportunity to chart out a new direction. Inviting all the members of BIMSTEC, Afghanistan and Maldives is a smart move. It broadens the canvas for Brics’ role and expands India’s outreach in the region. These linkages will strengthen India’s Act East policy, help economic growth of India’s north-eastern states, and weaken China’s domination of Brics and send out a clear message to Pakistan that it will be marginalised if it continues to pursue terrorism as an instrument of state policy.

India’s emphasis on institution building, implementation, integrating, innovation and continuity (IIIIC) under its chairmanship is sensible. Through Brics film festival, youth summit, young diplomat’s forum and football tournament India is promoting people-to-people contacts. Meeting between Mr Modi and Vladimir Putin before Goa Brics summit is likely to result in several contracts in the defence sector. It will also provide an opportunity to Russians to clear the air about their joint exercises in PoK when India was mourning the soldiers killed in Uri; these have caused consternation in India.

Before the Brics could forcefully demand their due from the G7 and Organisation for Economic Co-operation and Development nations, it must put its own house in order. Despite apparent weaknesses, Brics is only non-OECD forum, which enables its members to discuss global challenges frankly and try to coordinate their action and responses. Modi Magic should work on Brics too.

The writer is a former ambassador