BRICs Bring Little Opportunity To India

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Includes: BIK, BKF, EEB, EMDD, EPI, FNI, IIF, INDA, INDL, INDY, INP, INXX, PIN
by: Global Risk Insights

While the BRICS were once lauded as a group of emerging economic prestige, recent economic problems within member states suggest that India can find better opportunity elsewhere.

At a recent press conference in New Delhi, Indian Foreign Minister Sushma Swaraj announced that India will host the 8th BRICS Summit in Goa this October. In addition to this responsibility, India assumed Chairmanship of the organization in February 2016 and will remain in a leadership capacity through the end of the year. With New Delhi now at the helm of BRICS leadership, it is important to assess the utility of the organization for India's strategic and economic interests - and whether membership yields greater opportunity than risk.

The BRICS today

The five members of BRICS -Brazil, Russia, India, China and South Africa - represent more than 2/5th of the world population, with a combined GDP of over $16 trillion.

As a multilateral organization, the BRICS have had moments of success that have built on this economic strength to bring opportunity to both India and the remaining four members. One example of this is the BRICS Development Bank, which is currently headed by the former leader of India's largest private bank.

The Development Bank has granted India and its fellow BRICS-members the ability to counter similarly-focused financial institutions dominated by the West, known collectively as the "Bretton Woods System." In turn, New Delhi has gained substantial leverage internationally. Still, some argue that the BRICS are nothing more than an acronym, maintaining that an "anti-Western" sentiment is not enough to hold together an organization when the countries do not share a deeper common interest.

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As other BRICS countries have begun to lose steam, India has surged to the front of the pack. Source: The Economist.

This critique is made more clear when considering the fact that, apart from India, the other BRICS countries are not in good shape economically. President Dilma Rouseff of Brazil is likely to be shunted out in 2016, while President Vladimir Putin of Russia has few domestic accomplishments to show for as of late. President Xi Jinping of China, who began his reign with a strong economy, now must contend with serious economic challenges at home, and South African President Jacob Zuma faces similar economic challenges.

The disparities seen between India's relative economic success and the struggles of other BRICS members suggest that the organization may be out of sync with Indian interests.

The BRICS and Indian interests

Thus, it is important to have an understanding of India's key strategic interests to see whether New Delhi is in line with the goals of the BRICS and its collective members. If India's interests are not in line with those of the BRICS, then membership may in fact present an indirect risk to New Delhi's economic stability and international strategy.

Looking at India's own geopolitical and economic interests, the country has made some significant strides over the past few years with countries like Japan, Vietnam and Bangladesh.

Japan has committed to making heavy investments in India's infrastructure sector, including the Ahmedabad-Mumbai bullet train and highways in North Eastern India. There has also been a strengthening of strategic ties between both countries. Much to the chagrin of China, Vietnamese hydrocarbon firm PetroVietnam has given India's ONGC Videsh Limited a one year extension to explore a disputed oil bloc located in the South China Sea. Finally, New Delhi has also secured similar energy sector collaboration with Bangladesh.

India's deepened ties with a number Asia-Pacific countries has clear implications for its role within the BRICS. There is a clear "China factor" in each of these relationships, as fellow BRICS-member Beijing continues to solidify its status as the premier regional power. In turn, there is a greater opportunity in India-China relations for cooperation, but also a heightened risk of divergence.

These opportunities and risks affect the unity and effectiveness of the BRICS, and bring more uncertainty to the organization as a whole. If the BRICS appear disharmonious and ineffective with India at the helm of leadership, the policymakers in New Delhi may be received in a similarly negative light, and India's lucrative bilateral ties may be hurt elsewhere.

While India and China can work closely in a number of areas to alleviate these concerns, strong strategic divergences will continue to come in the way of BRICS functionality. The logic of India using the organization to raise its international stature is ineffective so long as the disparity between the Chinese and Indian economies exists, since their interests will remain mismatched.

In addition, while it is true that there are numerous differences between India and the U.S., the two countries strongly converge on issues contrary to Chinese interests - first and foremost being the South China Sea. This can also be seen in Latin America with Brazil, where India has begun to develop strong ties with countries in ways often unfavorable to Brazilian interests.

Better opportunities, fewer risks found elsewhere

These differences in policy goals among India and other BRICS members means that it is challenging for New Delhi to benefit from the organization. In fact, membership in the organization may even risk jeopardizing key Indian policy goals. Currently, the BRICS do not have much to offer India in terms of economic and political stability.

Given its current interests, India can find greater opportunity by strengthening its relationship with Japan, the Asian Development Bank, and the ASEAN. Closer ties with core regional organizations in South Asia, Latin America, and Africa also present favorable economic opportunities for India while avoiding the shortcomings presented by membership in the BRICS.

Although a number of strategic analysts argue that India should not submissively accept norms defined by the Western world, India lacks the potential to do so within the BRICS as long as China is a dominant force with divergent interests.

In short, it is unwise for India to bank excessively on an organization plagued by contradictions. While it is incorrect for New Delhi to write off the BRICS entirely, India's economy will not experience substantial gains from its membership within the organization without greater domestic stability in its members and a deeper convergence of interests.

Indian membership in the BRICS has no direct risk, but it certainly should not be among India's top priorities. There are numerous relationships and organization memberships with greater potential to bring economic and strategic benefit to India.