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Is BRICS a folly for India to embrace?

By Rajeev Srinivasan
August 01, 2014 15:17 IST
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BRICS leaders'To consider BRICS anything more than a temporary club with some common interests would be folly. The goal should be to induce others (Japan, ASEAN, South Africa) to align with us -- a non-threatening, democratic nation, rather than with malevolent China or waning America. For us to consider aligning with either China or the US would be absurd. India is just too big to be a sidekick,' says Rajeev Srinivasan.

I have been generally positive to the idea of the BRICS (Brazil, Russia, India, China and South Africa), or more precisely the original idea of BRIC as articulated by Goldman Sachs analysts Jim O'Neill and Roopa Purushothaman some years ago. I quite liked the two papers they brought out, for they pointed out plausibly how the lack of economic leadership had doomed India to failure -- which fit in with my hypothesis about the Nehruvian consensus, as I articulated in 'The Nehruvian Penalty' some years ago.

However, in its present incarnation as BRICS (with the addition of South Africa), I am beginning to wonder if the organisation serves a truly useful function so far as India is concerned. In the worst case, I worry that this will turn out to be another NAM (Non-Aligned Movement): India gained nothing from being a member.

To be more charitable, maybe it will be like membership in the British Commonwealth, which doesn't help India, but merely serves to give someone else (Britain) an importance that it doesn't deserve given its straitened circumstances (as a shrinking kingdom vulnerable to the secession of Scotland in September: not so 'great' anymore?).

What triggered off this concern were two recent events: One, the BRICS shindig in Brazil recently, and then the curiously uniform vote at the United Nations Human Rights Commission regarding Israel and Gaza, wherein the BRICS all voted as one (against Israel), when many others (Germany, Japan, Britain) wisely chose to abstain ('a pox on both your houses'). Let us analyse that vote further.

In general, the BRICS are a diverse bunch, and it is startling that they managed to speak with one voice on this contentious issue. For instance, Russia has a fraught relationship with Israel, partly because of sustained Jewish pressure on the Soviet Union to 'let my people go', as the slogan went, and partly because many Arab countries were client States of the erstwhile Soviet Union.

India, in its incarnation as the leader of the banana republics of the NAM, has usually voted against Israel, but with the new Narendra Modi government in power, it had been expected to abstain, as a measure of realpolitik. South Africa and Brazil have had fairly good relations with Israel, and so could have been expected to oppose or abstain.

China was the real surprise, as they have a consistent, and wise, habit of never poking their noses into other peoples' business. They almost never take a stand on anything that doesn't have a significant impact on their national interests. In this case, it is hard to see what Chinese national interest is served by going with the motion, other than the fact that it was authored by 'all-weather friend' Pakistan.

This leads me to wonder whether this UNHRC vote was discussed and decided upon at the BRICS summit in Brazil. If it was, that sets a bad precedent and also doesn't make any sense. If these are the big countries that will decide the future of the world, as the Atlantic fades and the Indo-Pacific theatre comes into its own, then it is truly astonishing that they should act as so many sheep. It also doesn't fit in with the characters of their leaders: Dilma Roussef and Vladimir Putin, for instance, are not known to be meek.

Thus, the question arises as to what else was discussed at the BRICS summit and what its fallout is on India. The worst case scenario is that the BRICS is becoming a fan club of the Chinese (sort of like the British Commonwealth is of the British or the Shanghai Cooperation Organisation is of the Chinese). This is the last thing India needs to do: Support its biggest enemy, China. I repeat that, going one step further than George Fernandes, who was crucified for saying China was India's biggest potential enemy.

Admittedly, India did gain some things from the BRICS jamboree in Brazil. It was a good opportunity for Prime Minister Narendra Modi to arrive on the global scene and look statesman-like. It was a pleasure to see his body language -- as an equal with other leaders -- as compared to Manmohan Singh's 'I don't deserve to be in the same room with these big people' diffidence.

Besides, the announcement of the BRICS Bank (known as the New Development Bank) and the Contingency Reserve Arrangement (roughly equivalent to the World Bank and the IMF) are a way of letting the Americans know that the Bretton Woods agreement and the Washington Consensus are now a bit long in the tooth.

These have been very convenient for the US as they eventually made the dollar the reserve currency of the world, and Americans could (and do) export inflation and other troubles by simply printing dollars. The fact that Richard Nixon unilaterally removed the gold standard in 1971 has helped the US happily run deficits, duly funded by the Chinese and others.

Now we don't want to be party to actions that end up setting up the Chinese yuan as a new reserve currency, from which China would derive all the benefits. So India needs to be careful about its enthusiasm for the BRICS Bank.

The West didn't really appreciate the setting up of the new institutions, and their analysts were sceptical, if not scathing. Which means it makes them a little nervous, and therefore is a good thing.

From India's point of view, the only tangible benefit from the BRICS Bank is the chance that some of China's excess capital may be borrowed by India via the bank, thus avoiding direct, likely onerous, interference from the Chinese government. Besides, in future, other non-BRIC emerging countries will be able to get loans: When India has an investible surplus, that can be channeled through this entity.

However, it is not clear how well this may work, given that there are several other multilateral banks around, such as the Asian Development Bank, IBSA (India-Brazil-South Africa) and Mercosur Bank (for Latin America). The imminent default by Argentina is an indicator of the pitfalls on the way.

Nevertheless the wake-up to the Americans is real. I write this on the day US Secretary of State John Kerry visits India, and I am sure this is a matter of concern to him, although the visit is pro forma and meaningless: given his preference for Pakistan, and Obama's reported statement regarding Modi (K P Nayar's piece in The Telegraph) India is viewed by them as a menace.

But there is a bigger and more subtle issue of strategic intent here: neither should India be satisfied with an American-dominated system (not so great for India as the current WTO tussle over the grossly obscene subsidies from the US Farm Bill -- some $50 billion-worth a year for five crops -- shows); and nor should it desire a Chinese-dominated system (which, based on past form, would be infinitely worse).

India's goal should be to establish itself as a third pole, rather than submit to a G2 of the US and China. Just about now, China would have become the biggest economy in the world at PPP (purchasing power parity -- admittedly a somewhat notional measure); in another 30 years, India's goal should be overtake both and become Number 1 compared to Number 3 today. That is a stretch goal, but not an absurd goal -- few remember how China was in bad shape before Deng Xiaoping, just 35 years ago.

Consider the other contenders for Number 1: Russia is a waning power (its demographic implosion -- it has fewer people than Pakistan, a country 1/13th its size -- makes it vulnerable to Chinese invasions); South Africa has serious problems with race and crime; Brazil has always been the 'country with great potential', but as demonstrated by its World Cup loss, it often falls short. Thus the only BRICS member that could possibly be the Number 1 power is India, if it does things right. Which basically means having good leadership (as Deng provided for China).

Can India pull this off? There is one major problem in its economic affairs -- the syndrome of under-preparedness that dogs much Indian endeavour. There is the touching belief that not preparing, and then pulling an all-nighter, can solve most problems. This is strictly untrue -- because the people on the other side are equally smart, and they are systematic. They plan. We need to, too.

It is clear that a Chinese Dhritirashtra-alinganam will not do India any good. The BRICS direction can be used to keep both the Americans and the Chinese at arms-length, while planning all the while to play them off against each other, and to form India's own club of admirers, perhaps in the Indian Ocean Rim, including the market of the future, Africa.

In the meantime, making some polite noises about BRICS is appropriate. Unfortunately, India's politicians tend to start believing their own propaganda; but to consider BRICS anything more than a temporary club with some common interests would be folly. The goal should be to induce others (Japan, ASEAN, South Africa) to align with us -- a non-threatening, democratic nation, rather than with malevolent China or waning America.

For us to consider aligning with either China or the US would be absurd. India is just too big to be a sidekick.

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