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First president to be Indian, but will the BRICS bank work for us?

In 2001, Jim O Neill, coined an acronym BRIC in a paper titled,’ The World Needs Better Economic Brics’ for the Goldman Sachs’ Global Economic Papers series. Broken down, the acronym referred to four countries-Brazil, Russia, India and China-- that would gradually and inexorably become the growth poles of the world. (Since then South Africa has been added to the list and the acronym expanded to BRICS).

Initially scoffed at, viewed with skepticism and called a ‘Teflon term’ , the concept of the BRICS has since gained traction. The stupendous growth run of the emerging economies , the grouping which the BRICS dominate, from the early to mid nineties lasting almost till the 2008 financial crisis lent credence to the saliency and power of the BRICS. It was (or even is) believed that the leverage that economics and economic growth gave the group, would allow the BRICS states to forge and shape the global balance of power.

BRICS are in the news again following the creation of the BRICS development bank. The bank is ostensibly meant to be an alternative to the IMF and the World Bank-global governance institutions forged from the detritus of the Second World War and the experiences of the interwar period. These premier institutions have evolved in terms of their remit and mandate over the years but not in terms of the power and influence that Western nations hold within them. They bear a clear cut Western ingress and imprimatur despite the strides that emerging economies like the BRICS have made over the years. This appears to be the main rationale for the creation of the BRICS Development Bank.

India will be the first President of the bank while the first chair of the Board of Governors will be from Russia. The bank will have an initial authorised capital of  $100 billion. The initial subscribed capital shall be of $50 billion to be equally shared by the founding-members. China won the race for getting the bank's headquarters in Shanghai even as India also made a pitch for its location in New Delhi.

Representational Image. Reuters

Representational Image. Reuters

Obiter Dictum, the institutional firmament of the World Bank and the IMF, also known as the Bretton Woods system, is not flawless: scathing critiques have been launched against both. The criticisms are not gratuitous: both institutions suffer from flaws. (Delineating these is besides the point here given the nature of the piece).

The alleged power and the salience of the BRICS and now the putative formation of the BRICS Development Bank raise a whole host of questions. Some of these questions are: Will be BRICS be an alternate pole, albeit with a regional flavour, to the West in international politics? If it does morph into an alternate growth pole, will it be a grouping of equals or will some nation be the primus inter pares in it? Last, what should India’s orientation and focus be? Should it lend its focus and attention to the BRICS or should its focus be elsewhere?

The BRICS are unlikely to make a significant dent in system polarity. The reasons are both economic and political. Since the 2008 financial crisis, the emerging economies and BRICS components have witnessed a rather secular decline in their trend growth rates. Capital which was flowing into these economies has reversed its course and is flowing back to the advanced economies especially the United States. (The Fed’s unconventional monetary policy, Quantitative Easing (QE) , among other things , changed the equation to a large extent). All BRICS nations have suffered. This means that the BRICS are not exactly the growth poles they are made to be; the centre of gravity of economics, despite the slowdown in the United States and the deep recession that the euro zone countries, still lies in the West. This is more poignant in the domain of innovation. The West leads here.

Politically, the BRICS grouping is a heterogeneous one; there are not many similarities amongst nations that comprise the BRICS. This implies the possibility of conflict amongst them and poses an obstacle to collective action. In the absence of an overarching similarity or ideological and ideational glue, the grouping cannot really act coherently on the world stage. Yes: there may be an alignment of interests on certain issues (climate change, for instance), but this will be issue based and ad hoc.

Moreover, some members of the grouping may not see eye to eye on certain issues and may have legacy issues between each other to contend with. China and India may constitute classic examples here. Overlaying these issues is the issue of hegemony within the grouping and the putative Development Bank. Will, for instance, China, with aspirations of global leadership play second fiddle to India or even countenance equal status with India? Or will China use the grouping and the Bank as a Trojan horse? Would it not be rational for China to use the grouping and the Bank as an access point to other regions and expand its influence thereof? Or use the Bank as a source of leverage against the United States? If the state is still the basic unit of international relations and politics, and given that states are selfish entities motivated by power and security, the answers are not too sanguine.

Amid all this, what could India’s posture, orientation and focus be?  India is held to be an emerging power. It seems to have gotten stuck into this paradigm.  As a nation or a civilization seeking a position of status and prestige in the international system, it may be prudent for India to hold on to its western orientation. The West, especially the United States, contrary to prognostications of doom, is not in decline. Despite the humongous problems that the United States is facing, it remains pre-eminent and paramount. It is a full spectrum power, which should not be confused with economics--economic growth is a component of power. India, should understand the nature of power in the 21st century and then develop an expansive strategy. This would naturally call for a deep partnership with the United States and other powers of import. The BRICS, while an important grouping, does not fall under this rubric.  India should  not fall into the trap of bleary eyed and mushy rhetoric. It’s a Hobbesian jungle out there where power and power politics runs the roost. Let India not lose sight of this.