Home Contact Us  
   

India - Articles

Print Bookmark Email Facebook Subscribe
#4599, 7 July 2014
 
The BRICS Development Bank: A Game-Changer?
Sonia Hukil
Research Intern, IReS, IPCS
E-mail: sonia.hukil@gmail.com
 

At the 2014 BRICS summit held in Brazil from 14-16 July, the five member countries agreed to the creation of a New Development Bank (NDB) and Contingent Reserve Arrangement (CRA). Will this move enhance the BRICS’ economic clout by countering the hegemony of Western-run financial systems? Will it be a game-changer? 

Significance of the BRICS Bank
The NDB will have an initial subscribed capital of $50 billion, which premises on an equity principle wherein the five signatories will contribute $10 billion each towards the $100 billion bank corpus. The capital base will fund infrastructure and sustainable development projects in the BRICS countries and eventually in the rest of the developing countries. The CRA is a fund pool to aide countries in hedging against short-term liquidity pressures. In contrast to the NDB, the CRA will be unequally funded by the BRICS – with China, contributing 41 per cent, at the helm. These arrangements are expected to have massive economic and political impacts.  

The formation of the NDB is proclaimed to be just, inclusive and forward-looking. It provides an equal voting status to the founding members and offers loans for assistance without attached conditions. This is envisioned in order to deepen present and long-term cooperation amongst the BRICS nations and further strengthen South-South economic cooperation. 

Clearly, the BRICS’ main motive behind these initiatives is to press for a larger role in the international economic order that is otherwise centered on the International Monetary Fund (IMF) and the World Bank (WB). The NDB intends to supplement, and, perhaps later, supplant these multilateral institutions for a new financial architecture. The BRICS nations are craving for more control over their own resources as well as for greater representation in order to democratise the framework of multilateral funding systems. 

A Game-Changer? 
Will the BRICS bank succeed in challenging the Western hold on global finance? Or will it have a mere symbolic and rhetorical impact? 

In proposition at least, the BRICS hold the financial capacity to counter the hegemony of the WB and IMF given how four of the BRICS founding members – China, India, Brazil and Russia – are the among the world’s top 10 economies. Yet, the reality is riddled with complexities. The NDB’s subscribed capital base and authorised lending is miniscule in comparison to the WB – which is estimated to lend approximately $60 billion this year. Clearly, lending by the NDB will not be sufficient to make a substantial impact on the development process of emerging nations. It will be difficult for the NDB to challenge the reach and expanse of existing development institutions. 

Meanwhile, through the NDB, the BRICS will continue to conduct their business using the dollar, thereby making their economies function in accordance with policies and procedures designed by the US. There is no other alternative to the dollar as it is the primary choice for financial transactions, globally. Thus, instead of controlling the global economic order, the BRICS nations likely to remain stuck in it for the near future. 

Furthermore, structural disparities are likely to be a tipping point for differences amongst the BRICS. This remains the core issue for de-stabilisation of the BRICS institutions. China is not only the second largest economy in the world but also substantially larger than all the BRICS nations’ economies combined. China’s contributions to the CRA will be significantly more than the rest of the member-nations’. Analysts state that China will bring countries from its own sphere of influence for membership. Thus, with greater political and economic clout, Beijing will overwhelm the institution. Fears linger that more than being a jointly-held banking system, the NDB will demonstrate China’s individual supremacy. 

Moreover, the economies of the BRICS member-nations are projected to a downturn in the foreseeable future. Their future growth will be less remarkable as compared to the past due to consistent economic troubles like inflation. Some even speculate that the next financial meltdown will come from the BRICS. Failure to sustain high growth rates will thwart the lending capacity of the BRICS and in turn augment their dependency on the WB and the IMF.

The BRICS’ divergent interests, priorities, and governance systems further raise doubts on its ability to challenge the Western-dominated financial systems. Intra-BRICS dynamics too seem delicate. India-China ties have deteriorated over territorial disputes; Russia seems worried about China’s growing economic influence,  and South Africa’s ties with China have been staggering in light of rising Chinese demands for its vital resources. The BRICS bloc therefore appears to be a fragile partnership of convenience that may possibly encounter demise in the future given China’s hold on power. The initiative taken during the summit is ground-breaking. However it is doubtful to envision the BRICS bank’s success in replacing the existing development banks and re-balancing the global economic order. 

India has high expectations from the BRICS bank. However, policymakers in New Delhi should not be complacent with its standing within the bank. India must tread cautiously and decisively along the BRICS road, and, if needed, must not shy away from taking a different turn altogether.

Print Bookmark Email Facebook Subscribe
IPCS Columnists
Af-Pak Diary
D Suba Chandran
Resetting Kabul-Islamabad Relations: Three Key Issues
Can Pakistan Reset its Relations with Afghanistan?
The New Afghanistan: Four Major Challenges for President Ghani
Big Picture
Prof Varun Sahni
Understanding Democracy and Diversity in J&K
When Xi Met Modi: Juxtaposing China and India
Pakistan?s Tactical Nuclear Weapons: The Inevitability of Instability

Dateline Colombo

Asanga Abeyagoonasekera.
Sri Lanka: Moving Towards a Higher Collective Outcome
The Importance of Electing the Best to our Nation's Parliament
Sri Lanka: Toward a Diaspora Re-Engagement Plan
Dateline Islamabad
Salma Malik
Pakistan's Hurt Locker: What Next?
IPCS Forecast: Pakistan in 2015
India-Pakistan Relations in 2015: Through a Looking Glass
 
Dhaka Discourse
Prof Delwar Hossain
IPCS Forecast: Bangladesh in 2015
18th SAARC Summit: A Perspective from Bangladesh
Bangladesh in Global Forums: Diplomacy vs. Domestic Politics
Eagle Eye
Prof Chintamani Mahapatra
India-US: Significance of the Second Modi-Obama Meet
Has President Obama Turned Lame Duck?
Modi-Obama Summit: Criticism for Criticism?s Sake?

East Asia Compass
Dr Sandip Mishra
India-Japan-US Trilateral: India?s Policy for the Indo-Pacific
China-South Korea Ties: Implications for the US Pivot to Asia
Many ?Pivots to Asia?: What Does It Mean For Regional Stability?
Himalayan Frontier
Pramod Jaiswal
Nepal?s New Constitution: Instrument towards Peace or Catalyst to Conflict?
IPCS Forecast: Nepal in 2015
Constitution-making: Will Nepal Miss its Second Deadline?

Indo-Pacific
Prof Shankari Sundararaman
IPCS Forecast: Southeast Asia in 2015
Indonesia's Pacific Identity: What Jakarta Must Do in West Papua
Modi in Myanmar: From ?Look East? to ?Act East?
Indus-tan
Sushant Sareen
IPCS Forecast: Pakistan in 2015
Islamic State: Prospects in Pakistan
Pakistan: The Futility of Internationalising Kashmir

Looking East
Wasbir Hussain
Myanmar in New Delhi's Naga Riddle
China: ?Peaceful? Display of Military Might
Naga Peace Accord: Need to Reserve Euphoria
Maritime Matters
Vijay Sakhuja
Indian Ocean: Modi on a Maritime Pilgrimage
Indian Ocean: Exploring Maritime Domain Awareness
IPCS Forecast: The Indian Ocean in 2015

Nuke Street
Amb Sheelkant Sharma
US-Russia and Global Nuclear Security: Under a Frosty Spell?
India's Nuclear Capable Cruise Missile: The Nirbhay Test
India-Australia Nuclear Agreement: Bespeaking of a New Age
Red Affairs
Bibhu Prasad
Countering Left Wing Extremism: Failures within Successes
Return of the Native: CPI-Maoist in Kerala
The Rising Civilian Costs of the State-Vs-Extremists Conflict

Regional Economy
Amita Batra
India and the APEC
IPCS Forecast: South Asian Regional Integration
South Asia: Rupee Regionalisation and Intra-regional Trade Enhancement
South Asian Dialectic
PR Chari
Resuming the Indo-Pak Dialogue: Evolving a New Focus
Defence Management in India: An Agenda for Parrikar
Pakistani Taliban and Al Qaeda in Afghanistan: Implications for Asian Security

Spotlight West Asia
Amb Ranjit Gupta
Prime Minister Modi Finally Begins His Interaction with West Asia*
A Potential Indian Role in West Asia?
US-GCC Summit: More Hype than Substance
Strategic Space
Manpreet Sethi
India-Russia Nuclear Vision Statement: See that it Delivers
Global Nuclear Disarmament: The Humanitarian Consequences Route
Nasr: Dangers of Pakistan's Short Range Ballistic Missile

The Strategist
Vice Admiral Vijay Shankar
Jihadi Aggression and Nuclear Deterrence
The Blight of Ambiguity
Falun Gong: The Fear Within


OTHER REGULAR contributors
Gurmeet Kanwal
Harun ur Rashid
N Manoharan
Wasbir Hussain
Rana Banerji
N Manoharan

Ruhee Neog
Teshu Singh
Aparupa Bhattacherjee
Roomana Hukil
Aparupa Bhattacherjee


 
Related Articles
Vijay Sakhuja,
"BRICS: The Oceanic Connections," 4 August 2014
Teshu Singh,
"BRICS: China’s End-Game," 31 July 2014

Browse by Publications

Commentaries 
Issue Briefs 
Special Reports 
Research Papers 
Seminar Reports 
Conference Reports 

Browse by Region/Countries

East Asia 
South Asia 
Southeast Asia 
US & South Asia 
China 
Myanmar 
Afghanistan 
Iran 
Pakistan 
India 
J&K  

Browse by Issues

India & the world  
Indo-Pak 
Military 
Terrorism 
Naxalite Violence 
Nuclear 
Suicide Terrorism 
Peace & Conflict Database 
Article by same Author
India-Bangladesh: Can the Maritime Boundary Resolution Rebuild Faith?

A Ray of Hope for India-Bangladesh Relations?

ADD TO:
Blink
Del.icio.us
Digg
Furl
Google
Simpy
Spurl
Y! MyWeb
Facebook
 
Print Bookmark Email Facebook Subscribe
Year 2017
 January  February  March  April  May  June  July  August  September  October
 2016  2015  2014  2013  2012  2011  2010  2009
 2008  2007  2006  2005  2004  2003  2002  2001
 2000  1999  1998  1997
 
 

The Institute of Peace and Conflict Studies (IPCS) is the premier South Asian think tank which conducts independent research on and provides an in depth analysis of conventional and non-conventional issues related to national and South Asian security including nuclear issues, disarmament, non-proliferation, weapons of mass destruction, the war on terrorism, counter terrorism , strategies security sector reforms, and armed conflict and peace processes in the region.

For those in South Asia and elsewhere, the IPCS website provides a comprehensive analysis of the happenings within India with a special focus on Jammu and Kashmir and Naxalite Violence. Our research promotes greater understanding of India's foreign policy especially India-China relations, India's relations with SAARC countries and South East Asia.

Through close interaction with leading strategic thinkers, former members of the Indian Administrative Service, the Foreign Service and the three wings of the Armed Forces - the Indian Army, Indian Navy, and Indian Air Force, - the academic community as well as the media, the IPCS has contributed considerably to the strategic discourse in India.

 
Subscribe to Newswire | Site Map
18, Link Road, Jungpura Extension, New Delhi 110014, INDIA.

Tel: 91-11-4100-1902    Email: officemail@ipcs.org

© Copyright 2017, Institute of Peace and Conflict Studies.