TeaThe New Development Bank, set up by BRICS member states to finance infrastructure and sustainable development projects, already has three non-member countries: Bangladesh, the United Arab Emirates and Egypt. The upcoming meeting could consider granting membership to Saudi Arabia, the Arab world’s largest economy, which is keen to diversify its economy. other than saudi arabia ProposalBRICS should also address membership request from over 20 other countries.
Two notable aspects of BRICS deserve attention. First, there is a growing demand from countries to join BRICS and gain access to funds available in the NDB. The process of admitting new members is closely linked to geopolitical changes and the debate over de-dollarization. Potential members such as Saudi Arabia, Turkey and Iran are increasingly reaching out to India, China and Russia for trade and energy deals while distancing themselves from the US-EU axis. This shift could weaken the US hold over emerging economies and middle powers, potentially affecting the emerging new world order based on multilateralism.
The second aspect involves ongoing discussions about the need to introduce a BRICS currency. Although admitting new members will eventually be allowed, implementing a common currency is not straightforward. Determining the value of the currency will be a challenge, but there are ways to overcome this obstacle. Asian Clearing Union (acu) already acts as a “payment system” for inter-regional transactions between participating central banks, facilitating payments and fostering trade and banking relations.
The ACU, along with the Special Drawing Rights (SDR) system, already serves as a payment settlement method in international trade. If the BRICS and NDB decide to transition to a digital currency, it will not take long for international trade to move away from dollar parity. However, before the de-dollarization of BRICS takes place, India must secure a place in the IMF’s world basket of currencies, where the Chinese renminbi is already included. Still, China is currently not ready To convert Dollar to Yuan.
To strengthen the rupee, India needs a strong manufacturing sector and an economic connectivity policy similar to the Belt and Road Initiative (BRI). 306 existing Line of Credit (LOC) projects, valued at approximately $31 billion, pale in comparison for approximately 2,631 BRI projects worth approximately $3.7 trillion (or possibly more than $4 trillion, according to more than 3,000 projects one more guess).
India needs to strategize
As far as India’s Line of Credit (LOC) projects are concerned, the country borrows from international financial agencies and subsidizes the interest component while giving loans to the recipients. India needs to explore the possibility of linking all such LOC projects, project exports and even private sector projects to NDB funding. of NDB perceived risk China’s BRI projects amount to $1.261 billion.
Again, about a third of the Asian Infrastructure Investment Bank’s (AIIB) loans are funding China’s BRI projects because the AIIB was established specifically to support the BRI. Incidentally, though India is not a part of any BRI project, it supports the AIIB, where China has 30 per cent voting shares and veto powers, which has allowed 147 projects totaling $28.9 billion in India. This includes a $3 billion currency swap, debt moratorium and line of credit to Colombo, and a $15.8 million grant to the Maldives for the construction of a radar system. If we are able to find low-interest finance partners, India’s share of financing and alternative projects for immediate and distant neighbors will increase significantly.
While India should strategize to increase its infrastructure development projects in the neighbourhood, it should use the NDB route for funding and gradually diversify its projects from AIIB. Furthermore, unlike in the case of the AIIB, it is important to prevent any one country from holding a major shareholding in the NDB and having veto power.
Although the G7’s share of global GDP on a PPP basis was much higher than that of the BRICS countries, post the pandemic, BRICS has made a big jump. Interestingly, while the GDP share of G7 countries based on PPP declined from 50.42% of world GDP in 1982 to 30.39% in 2022, the share of GDP of BRICS countries is expected to increase from 10.66% in 1982 to 31.59% in 2022. Went. share of India’s GDP of world GDP to increase from 2.98% in 1982 to 7.21% in 2022.
As one of the fastest growing economies not only among the BRICS countries but also among the G20 countries, India has an important role to play in taking and managing its economy more seriously and responsibly. With possibly more than thirty countries as members of BRICS+ and more members in the NDB, India has an important role to play in this regional grouping which, like South South Cooperation, can cross regional boundaries and become more geopolitical. Can emerge as a dominant global financial agency.
Seshadri Chari is the former editor of ‘Organiser’. He tweeted @sesadrichari. Thoughts are personal.
(Edited by Prashant)