As leaders of BRICS have arrived in India to take part in the eighth annual summit of the group, the much glorified growing economy giants have number of issues on the table, including terrorism, political and economic crisis. However, more than any other difficulties, what makes them all worried would be the stagnant growth of their economies.
BRICS refers to the five significant emerging economic and political powers such as Brazil, Russia, India, China and South Africa. The acronym, BRIC, was initially formulated in 2001 by economist Jim O’Neill, of Goldman Sachs. The term coined to denote the first four countries, which were then speculated would be wealthier than most of the current major economic powers by 2050. The BRIC nations themselves started to negotiate as a collective grouping in 2006 and later in 2010, invited South Africa to join the bloc, expanding the acronym as BRICS.
With the remarkable economic growth, industrial development and political gravity in international relations, the BRICS countries have emerged as a great challenge to the existing western dominated global order. And finally, the formation of New Development Bank (NDB), known as the mini-IMF, in 2014 fastened their surging economic growth. It was forecasted that, with the dynamic demographic and geographic aspects, the bloc would be capable of influencing the economic development in developing and underdeveloped countries soon.
However, the weak commodity prices and other financial and political crisis among the BRICS nations have put their growth in hold at the moment. Being commodity-dependent economies, these countries are suffering from the ongoing crisis in the sector, putting their economic future in uncertainty. According to Wall Street Journal, China was growing at an average rate of more than 10% a year, peaking at more than 14% in 2007, while India averaged 8%; Russia 5%; and Brazil and South Africa around 4%. But the recent data suggest a slow growth of BRICS nations in the world economy, contributing 14% less to global growth from nearly 50% recorded in 2013.
In 2015, the Brazil economy suffered its worst slump for quarter of a century due to both the economic and political troubles. The country’s GDP fell 3.8% last year, the steepest decline since 1990. The credit rating agency Stadard&Poor’s recently downgraded Brazil’s long-term debt into junk territory, indicating the situation is getting really worse in the economy. Moreover, the ongoing political crisis could only deepen the wound.
The recession-hit economy of Russia has nothing different to offer. The falling oil price and the uncertainty in the market has strangled the country’s economy. In addition, the conflict with western countries over the Ukraine crisis and the instability of Rouble over the past years have made Russia as another imbalanced BRICS partner. The state statistics reveal that the country’s poverty rate remains in nine-year high as the energy-reliant economy shrank by 3.7% last year and is set to continue suffering this year.
Among rest of its partners, India remains in a steady position as it manages to consistently maintain a GDP of 6 to 7 percent. Rupee being stable in the recent past, India stands out among the other emerging economies as a notable exception to the general pessimism. India’s GDP grew 7.9% year-on-year in the March quarter, faster than the December quarter’s 7.2%, extending its lead as the world’s fastest growing large economy, Reuters reported. However, it is a reality that the country needs a strong push to move ahead steadily, battling with subdued private investment and shrinking exports.
With the support of an equal contribution from manufacturing and services, and agriculture sector, China accelerated its economic growth in the past decades. However, the world’s second largest economy, recently showed a slowdown in its growth rate. In addition to the stock market crash, the global commodity glut, devaluation of the yuan and a huge debt problem have held back the country’s economic growth.
Supported by its prudent fiscal and monetary policies, South Africa was able to stabilize its economy while much of the world struggled to cope up with the financial crisis. According to Statistics SA, the country’s economy grew by a marginal 0.7% in the third quarter of 2015. But South Africa, joining with the global trend, is facing difficulties in its economy. The latest data reveals that three of the ten main industry groups shrunk in size, while unemployment, at a rate of 25%, remains the most challenging of the country’s hurdles.
Having all these challenges to overcome, both individually and as a group, the future of BRICS as a counterweight to western economic powers raises concerns. In the present scenario, given the scope of an enduring economic slowdown among themselves, the efforts of BRICS to build an alternative economic path are looking like increasingly risky ventures. The capability of the association to emerge as a strong economic and political bloc by overcoming the existing challenges needs to be tested now. In order to achieve the projected goal, that challenges the Western-dominated equations, the coming summit needs to weigh up all the available possibilities to accelerate its growth. The alliance requires to take all the differences, i.e. political, economic and geographical, into consideration to face new global challenges.