AN OPPORTUNITY FOR DEVELOPED & EMERGING ECONOMIES

BRICS, represented by large emerging economies Brazil, Russia, India, China and South Africa connects around common development interests where no single power dominates the world. Ignoring BRICS as a major policy force is no longer an option. It accounts for 41% of the world’s population, 31.5% of the global gross domestic product and 17% of the total trade. The group’s combined fossil fuel production is approximately 40% of global oil production and 32% of world output of natural gas. As China, India, Russia and Saudi Arabia are big consumers, BRICS+ represents 22% of the world’s oil export market volumes. It has a lot of bargaining power. And now the group is looking to expand, with 23 formal candidates of which 5 have been added already this year, i.e. Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE).

The growth of BRICS+ shows that, emerging markets are now ready for a larger role in the world order. The group aims to undermine the dominance of US dollar, and there are some countries like India and UAE, where the preference is for their own currencies to take bigger share.

The creation of New Development Bank (NDB) as an alternative lender to the World Bank and the International Monetary Fund (IMF) affiliates suggests a desire to supplement the existing established multilateral institutions.
These countries have created an alternative financial transactions platforms which helps insulating these countries from potential financial sanctions in future.

There are few reasons, BRICS+ can potentially shift the world order.

Energy: During times of volatility in energy markets, BRICS+ having many of the biggest energy buyers and sellers could give rise to a parallel energy trading system. As this would be outside of western-led financial system, it would perhaps give them the ability to influence oil prices.

Trade: The share of global trade in goods transacted among the group’s current members more than doubled, to more than 40% from 2002. China’s growing role as a supplier of industrial and consumer goods, as well as importer of commodities has been a key force for integration. China is also a major market for Brazilian soybeans and iron ore and a major exporter of advanced goods such as electric vehicles, solar panels, and heavy machinery. Western sanctions relating to war in Ukraine, have diverted the Russian exports to BRICS+ markets, notably China and India.

Infrastructure and development financing: By 2023, the New Development Bank (NDB), capitalized at $100 billion, and China-led Asian Infrastructure & Investment Bank (AIIB) together had committed more than $71 billion in credit across sectors such as infrastructure, public health, and clean energy. The addition of Saudi Arabia and other cash-rich economies, could expand and diversify the financial resources of BRICS+.

Monetary Policy: Approximately 90% of global foreign exchange transactions are conducted in dollars and flow through US and European Banks. As BRICS+ includes leading commodity exporters and importers, group can become a conduit for foreign exchange transactions in currencies other than US dollars. The NDB, for instance, has issued about one-fifth of its loans in Chinese yuan. Russia, China, and other BRICS+ members also aim to promote digital currencies. The group has launched the beta version of a payment app (BRICSpay) that enables transactions in several non-dollar currencies.

Technological cooperation: Several of the BRICS+ initiatives aims towards co- operations and innovation in leading-edge technologies (such as intelligent manufacturing, artificial intelligence, digitization & clean energy). These efforts could help more emerging markets improve their capacity towards alternative technical standards.

Designing a BRICS-focused foreign policy is an opportunity for the United States, India, Europe, Japan and other BRICS nations, around development needs, potentially fostering a better alignment between countries of Global South and the United States. This could be in areas of AI development & governance, energy security and global restrictions on warfare.

The growth of the BRICS+ shows that, after decades of strong economic development, emerging markets are now ready for a larger role in the world order, one that better reflects their interests. Companies and western countries that adapt to this movement will be more likely to thrive in an evolving era of multipolar competition.

DISCLOSURES

•   Investment in securities market are subject to market risks. Read all the related documents carefully before investing
•   The securities quoted are for illustration only and are not recommendatory
•   Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors