19. The 21st century is the century of BRIC nations (Brazil, Russia, India & China) as was the 20th century of America. However one should not forget that there was a period of recession during the early part of 20th century. As per the studies carried out by the experts, there won’t be continuous growth every year without any disruption. In fact, the economist were surprised by the occurrence of events in 2008-09. However, they were not surprised that such a thing has happened, as it is a cycle that repeats sooner or later in the world economy. But the fact remains that just because there was an economic crisis in 2008, the relevance of BRICs does not end. In fact it has become more relevant as the emerging economies of BRIC are now driving the world economy. [7] The state of the world economy in the coming decade will be largely dictated by the turn of events in the BRIC countries Brazil, Russia, India and China. As all are with large population, hungry for growth, they are already influencing the global commerce and they have the potential to redefine and influence it even further. The BRIC countries have large, young populations base to further exploit this growth potential. The growing importance and influence of BRIC economies is largely due to rapidly growing market due large middle class population which offers lucrative markets for the world industries.
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20. The very fact that BRIC economies have shown consistent economic growth over the last decade and their increasing role in the economic activities in the world, Goldman Sachs who first introduced the term has now become more confident on the relevance of BRIC. German economy has already been taken over by China in 2008, and Japan in 2010. As per estimates of Goldman Sachs, Chinese economy will overtake US by 2035. As per reports, India is among the first 10 of the 30 fastest-growing areas in the world, thus it is likely to influence world economy in a major way and faster than expected by the experts. [8]
21. The leaders of BRIC nations have gained influence over the last decade as their economies have registered faster growth than those of developed countries. The BRIC countries along with the other emerging economies from the developing world have started playing important role in the decision making at various forum of trade, banking and climate change. The relevance of the BRIC economies in the present world order can be gauged from the following facts :-
(a) The BRIC economies is more than 22 % of the world economy.
(b) The real economic growth of China have consistently averaged at 9.75 percent since 1999, 7 percent in case of India and Russia, and 3.3 percent for Brazil. The global financial crisis of 2008 saw contraction of Russian and Brazil economy in 2009. However India and China continue to remain on a growth path, thus driving the recovery of world economy.
(c) As per the experts, the BRIC economies are expected to register further growth in the coming years, thus attracting industries and FDI.
(d) Brazil, being an dominating player in agricultural and mining sector, will be a major player in the world market after exploiting its oil reserves. After a period of rapid for last five years, though, its economy has gone into recession in early 2009 but has revived strongly and registered a healthy growth of 9 % in 2010.
(e) Russia, being one of the world’s major oil and gas producer, has been affected by the economic slowdown of 2008, in spite of the economic slowdown its economy has registered a healthy growth of about 4 % in 2010 which is largely assisted by recovery in oil prices.
(f) Indian economy is emerging strongly and is likely to grow at the rate of 8 %. The government and consumer spending is likely to further boost the growth.
(g) The BRIC nations are trying to build consensus on reducing the dependence on U.S. dollar as a global reserve currency, the options of basket of currencies or a system of drawing rates has been suggested by the forum.
(h) The BRIC nations have increased their influence at various forum of trade and banking and are dictating terms at these international forums, thus ensuring that their interests are addressed.
(j) India and Brazil, both being considered as strong contender for permanent seat in United Nations Security Council, however a lack of consensus among the nations in UN on the issue of UNSC reforms has long stalled the reform process.
(k) The BRIC economies have developed a common position on global climate negotiations, however there are differences among them on the issues of carbon footprints. Russia, has already ratified the Kyoto protocol in year 2004. However developing countries like India and Brazil are not agreeing to legally binding targets of emissions being enforced from 2013.
(l) Chinese economy has already overtaken Germany and Japan in 2008 and 2010 respectively and is likely to overtake US economy by 2035.
(m) As per experts, India will achieve its highest economic growth rate in next few years which will be higher than that of China and will overtake Japanese economy by 2030.
(n) As per economic experts, the currencies of BRIC countries will be appreciating upto 300% in next three to four decades, thus likely to be the favourite destination for investment in future this will give further boost to BRIC economies in coming future.
(o) In next three to four decades, the BRIC economies, taken together will overtake the economies of United States and the developed economies of Europe.
(p) In BRIC countries, a population of about 200 million with incomes above $ 15,000 is likely to get added in the world economy, giving boost to the global economic growth. This is equal to the populations of UK, Germany and France taken together.
(q) The BRIC countries together represents almost 42% of the world’s population; This offers a lucrative market of about 2.7 billion people to the world industries, thus making them a favourite destination for investment. These market also represents enormous future purchasing power, which is yet to be tapped.
(r) Reduced reliance on foreign debt. The consistent growth rate registered by BRIC economies over the last few years has helped them repay loans taken during the period of previous economic crisis, however with the increasing FDI in these countries, the reliance on foreign debt is getting reduced.
(s) Riding the roller coaster. The BRIC economies have registered consistent economic growth rate even during the economic crisis of 2008, however experts wonder that how long these economies can register positive growth rate without a dip and why these economies have not been affected by the slowdown. The world-wide slowdown in economic activities could not have a significant impact on investments in these countries. The reason identified by the experts is that as these are emerging markets with strong economic status and purchasing power, thus they have become the favourites FDI destinations, boosting their economic growth rates and increasing economic activities in these countries.
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22. As per studies carried out by Goldman Sachs which predicts that India and China, respectively, will remain major global player for considerable time as suppliers of services and manufactured goods, while Brazil and Russia would emerge and established themselves as major suppliers of raw materials. Thus the BRIC economies are complementing each other with Brazil and Russia together forming the natural commodity suppliers to Indian and Chinese industries. The economic analysts at Goldman Sach released a follow up report which is further to its initial report of 2004 on BRIC. As per this report, [9] the number of people in BRIC countries with an income of $3,000 and above will get doubled within next three years and reach a figure of 800 million by 2020. This rise in people with an income of $ 3000 and above represents a massive increase in the middle class in these countries. This rise represent further rise in demand of commodities which will not be restricted to only basic commodities but also have an impact on the demand of expensive goods. The analysts further predicts that between 2007 and 2020, per capita GDP in India’s will quadruple in terms of US$. It further predicts that the Indian economy will overtake US economy by 2050 and BRIC nations as a bloc will overtake economies of G7 nations taken together by 2032.
Vision
25. India and China both are driving the world economy, thus helping in recovery of world economies from the effects of the economic crisis and being close neighbours, have become major trading partners. The BRIC nations have exploited the global economic crisis, as a means to improve their economic relationships and co-operation with the poorer developing countries. The BRICs have considerably increased their economic presence in the African countries as well as granted loans to African countries. India has provided loans of more than $200 million at the same time China has invested approximately $4000 million as foreign direct investment. Russia and Brazil has invested more than $3000 and $4000 million in Africa. Through huge economic assistance, the BRICs are not just providing aide to these countries, but also showing their capability to provide financial help to the developing world. This has helped in improving trade ties and getting access to the markets of the poorer economies which are likely to evolve more strongly in coming future.
26. The globalization and ever growing demand for energy and other raw material, along with the trend of outsourcing helped stimulate the BRICs economic growth. India dominating in service outsourcing sector, termed as back office of the world. Brazil and Russia have vast energy and mineral resources, and China has emerged as world’s manufacturing plant, being termed as shop floor of the world by experts. Indian economy is presently growing at the rate of 8.5% a year, and China’s at more than 10.5%, and the combined GDP of BRIC countries is US $ 5.2 trillion in 2006 and is growing even stronger day by day.
27. The BRIC thesis proposed by Goldman Sach suggests that, India and China will emerge as the leading players in the field of services and manufactured goods, respectively, similarly Russia and Brazil will become key suppliers of raw materials thus complementing India and China. Thus BRIC countries have the potential to form a dominating economic bloc in which all members complement each other thus boosting each other’s growth. The BRIC forum in present form cannot be considered as a political alliance or a formal trading association. The leaders of BRIC nations have taken steps to further increase political and economic co-operation, with a view to increase their influence on major trade accords, or as a means of gaining political concessions from the US, civil nuclear deal between India and US is an apt example of success story of this policy.
28. Goldman Sachs [10] suggests that the economic potential of BRIC countries has the potential of making them the four most dominant economies in next three to four decades. The BRIC thesis was first proposed by Jim O’Neill, global economist at Goldman Sachs. The BRIC countries together accounts for almost 40% of the population and encompass 25% of land in the world. Taken together they hold a combined GDP of approximately 16 trillion dollars. As given above, in almost every field, the BRIC countries are emerging as the leading players in the world. These countries are among the fastest growing economies and emerging markets.
29. The opportunities that the BRIC have for further economic integration in various sectors are evident. Brazil and Russia will continue their leadership roles in developing and trading natural resources, while India and China will remain global leaders in manufacturing, services and technology. All four economies have bounced back from the recession and are now sustaining the global recovery. On current trends, the group’s combined share in global gross domestic product should reach 60 percent by 2050. The countries’ growing economic weight has turned BRIC into a formidable bloc in the new multi-polar world order.
30. The rapid expansion of the emerging economics and BRIC in particular, present both opportunities and challenges in the new world order. There are significant opportunities to form new alliances as BRIC economies present potential growth which will spread the benefits of their development and robust economy to other regional economies as well. However the BRIC economies have to maintain the sustained growth rate to catch up with the more developed economies of the world.
31. The BRICs are becoming superpowers in the economic world. There is no doubt, that they have become much more important today than ever before. But whether they would surpass the expectations is to be seen in near future. However the fact remains that BRIC economies will be playing a key role in global efforts to tackle climate change. Though, it is true that today developed economies are responsible for the majority of greenhouse gases (GHG) already in the atmosphere, however developing countries are expected to account for 75% of GHG emissions over the next 25 years. Owing to its rapid industrialisation and growth, China has emerged as the world’s second-largest emitter of carbon dioxide, and is likely to be the highest emitter by 2020 surpassing US. As per experts, it’s in the BRICs own interest to reduce their emissions and pollution, and to pursue a cleaner path of development. The BRICs already face a number of environmental problems, including air and water pollution, rising strains on water supplies and resource depletion.
32. Though the BRIC countries have differences on various issues, however economic experts feel that they will play a important role in international politics in near future. As the debates on the implementation of emission control by developing countries and Kyoto Protocol are still on, it is believed that the BRIC countries are the ones who will be most affected in future, and therefore should play an essential role in the new developments on these issues. But the question remains whether these countries will be able to develop an alternate world order? Will they be able to reduce the level of US presence in their own region? BRIC has successfully taken its toddler steps and it will depend on the participating countries to develop it further.
33. India’s membership of BRIC bloc and India Brazil and South Africa, IBSA bloc and its effort for a permanent seat in the United Nations Security Council is part of grand strategy for the evolving multi-polar world order. India has a tremendous potential to shape and influence the emerging multi-polar world order as well as playing dominant role in it, through its strategy of multi-alignment. However, it will have to be less ideologically driven and more strategically savvy to achieve this goal.
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