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Mainstream, VOL LI, No 16, April 6, 2013

India and the BRICS Bank Way

Friday 12 April 2013, by Amna Mirza

The recently concluded fifth BRICS (Brazil, Russia, India, China and South Africa) Summit at Durban this year brought to light new contours of the world order. Held in Africa for the first time, it saw the presence of leaders of state like Dilma Rousseff, Vladimir Putin, Manmohan Singh, Xi Jinping and Jacob Zuma. Alongside deliberations on diplomatic relations, it presented the idea of a BRICS Bank to focus on infrastructure development because of insufficient long-term financing and foreign direct investment. The need of the hour is to understand the sense and connotation of this idea from the vantage point of India’s place in the globe.

The contemporary time is defined by globalisation which has generated the interplay of continuity and change. Globalisation is a contested concept. Just like there can be competing versions of democracy, and not a perfect version, so is the case with globalisation. Irrespective of the flipside of governance and equity issues, globalisation is here to stay. It is not as an ideology, but as a journey towards an undefined destination, where in the process of greater integration, the factors that make it work, namely, reduced costs, quicker communications, and economic liberalisation, are irreversible.

When geography is being re-configured, the social, cultural, economic space is no longer mapped in terms of territorial distances. This often gives rise of multilateral alliances and groupings and BRICS can be seen as one of them. The emerging national economies of Brazil, Russia, India, China and South Africa, which comprise BRICS, have a noteworthy substantial standing in the affairs of the world.

The global markets in the era of the 1970s witnessed that the naive faith in the Keynesian era was shattered by stagflation. Later, the exchange controls were abolished paving the way for free market models of laissez faire being reworked upon in the Reagan and Thatcher era. The ‘Washington Consensus’ was coined by the British economist, John Williamson, and emphasised sound fiscal and monetary policies, with reliance on market over the state. This pointed towards fragmentation of the national markets, and the need for international institutions to regulate the situation.

The inking of the BRICS Bank’s financial safety net was done at the G-20 summit in Mexico. Though its specific location is yet to be finalised, yet this idea goes well with the prerequisite for a just world order, that is, financial stability. In the current phase of turbulence with disturbances being caused by the weakening of structures of long-standing authority due to attacks from the global economic forces, the necessity is to diversify the points of power away from the current American and European ones.

India is looked upon as a pioneer, which occupies a central position in South Asia, with its colossal size and population, rich resources. It is often dubbed as what Joseph Nye defines as the ‘soft power’ with richness in culture, knowledge, society having the potential to mark a distinct niche for itself, as opposed to being a ‘hard power’ seen in crude military terms. Existing in the global era, the contours of security for the nation are also being expanded from the traditional military attacks to the non-traditional ones like terrorism, pandemics, economic integration, amongst others.

India can contribute more in the global terrain. Its diversity and ability to manoeuvre through different issues gives it a distinct place for itself. It can show the way for a new regime where there is space for plurality of values and interests.

The long-term financing market is also unexplored in the nation’s development spree. Being a developing economy, there are huge infrastructure requirements. Further, the unfettered international regime of existing financial structures of the International Monetary Fund and World Bank has benefited only a few at the expense of many. The mutual collaboration at the BRICS Bank shall do well keeping in view the limitations generated in the global demand for infrastructure funds. It shall also illustrate a way for the judicious use of global financial resources, where India’s prominence shall help it to play its due role as a financial player.

A good beginning always has a good end. India needs to tap in the potential of the BRICS Bank from the vantage point of development, financial stability and, above all, its latent potential of being a global player to guide the financial aspects of a regulatory institution.

Dr Amna Mirza is an Assistant Professor, University of Delhi.

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