India’s Strategic Options and BRICS

Introduction

The BRICS summit in Goa scheduled for mid-October (2016) has spawned a number of events all over the country on a whole host of subjects. It would not be incorrect to say that the word BRICS has appeared in the media more often in the last two months than over the past 10 years. Post- Cold war and with the unilateral moment in international affairs seemingly over, does BRICS present India with a viable alternative to carve out its own geo-strategic space? Many India strategic thinkers do not appear reconciled to the increasing irrelevance of the Non Aligned Movement and stress on retaining strategic autonomy. There is a distinct discomfort with what is seen as India hitching its fortunes with that of the United States.

It is therefore necessary to understand what BRICS is before one can see whether it has a future? There is scepticism that an acronym (BRIC) that came out of a global investment firm (Goldman Sachs) to draw the attention of international investors to the potentialities of large emerging markets that were currently under-priced with possibilities of huge gains. These countries with large domestic markets had the potential to become engines of global growth but needed sustained investments in infrastructure and productive investments, an attractive proposition for pension and long-term funds that were not looking for quick payoffs; such a relationship could benefit both once these economies could trigger sustained growth. But what is BRICS at present beyond an acronym? Samir Saran of the ORF very clearly explains, BRICs is not ‘a trading bloc or an economic union per se, nor a political union.’ What brings these countries together is ‘neither attractiveness of the economics of these countries nor a cosy ideological confluence.’ It does, however, reflect a desire for a new multipolar world order. Critics have pointed its members are ‘dysfunctional misfits.’ Their geopolitical compulsions have considerable variations with more dissonance than agreed agendas. Similarly, the structures of their economies have more competing and opposing interests than complementarities, e.g. China and India would like low petroleum prices while Russia’s imperative is high petroleum prices. Similarly Brazil relies on high international prices of soya and maize which it exports to China, who would like to pay less for its food imports.

Emergence of BRICS

So what accounts for the continuance of BRICS, if increased salience is still not on the horizon? It would be necessary to look into the historical context in which BRICS emerged. Though the acronym was coined in 2003, one can really trace its origin in the political sense to 2008. The Afghan and Iraq wars had exhausted the United States and there was a major inward shift to American politics. The rise of Obama as a presidential candidate overcoming the far more internationalist Hillary Clinton reflected this shift. The collapse of Lehman brothers and Obama’s subsequent sweeping win in the Presidential elections sealed this shift. (The rise of Bernie Sanders as a credible challenge to Hillary Clinton in 2016, and Trump’s emergence as the Republican candidate to challenge her indicates that insularity not global inter-connectedness is still the most important pole in American politics. And the BREXIT vote is a sign that this phenomenon is much larger than what most analysts gave it credit for). Economically, the 2008 financial crisis lead to a loss of confidence the US had in its abilities to affect global change far in excess of the physical loss it actually caused. What made it worse from the US point of view was that many others, like China and Russia saw it similarly.

In fact, globally this was seen as the end of the unipolar moment that the US had occupied since the fall of the Berlin Wall though it was still seen as predominant. This shrinkage of the US’s abilities and confidence was attributed to hubris of the Bush years. So while the US was able to lean on China to get India the NSG waiver as part of the US-India nuclear deal in 2008, it had to do considerable heavy lifting, a sign that its influence was waning. Similarly, Russia could prevent President Saakashvali  from ending the illegal status of North Ossetia and Abkhazia, parts of Georgia which functioned as de facto independent regions but the Russian army had to do so under the guise of ‘peacekeepers, a fig leaf it would not need when it seized Crimea from Ukraine in 2013. Similarly, China made aggressive moves in the South China Seas (SCS), far in excess of its actions in the past, but did not precipitate matters. Unlike again the 2015-16 seizure and build-up of defence assets on ‘islands’ created by reclamation in different parts of SCS and its brazen disregard of the ruling of the Permanent Court of Arbitration in the case brought by the Philippines.

However, as the financial crisis unfolded and became contagious and the West unable to reverse its affects, Russia and China saw this as a good opportunity to increasingly challenge the extant international system. China’s ability to keep on adding capacity and capturing more and more of the western markets, running huge trade surpluses was unprecedented. This gave it financial resources that it used adroitly to invest in infrastructure and prestigious projects in developing countries across continents. And launch its One Belt One Road initiative by merging the New Silk Road and the Maritime Silk Roads initiatives. However, the situation is not as simple as it looks, with the BRICS countries themselves, by and large, mired in economic and political difficulties.

Status of BRICS’ Economies

The Chinese economy is saddled with considerable excess capacities, with recent growth driven by public investments in non-viable infrastructure projects funded by the repressed financial sector. The shift from export-led growth to one fuelled by domestic demand is turning out to be much more difficult than expected, and but for the (unnecessary) investments across the country, the growth rate of the economy would be far below the expected 6.2%. Simultaneously, the success of President Xi Jinping in centralising powers has made him the arguably most powerful Chinese leader since Mao. This and the political purges carried out in the name of the anti-corruption campaigns threatens to upset that institutional arrangements that Deng Xiaoping had put in place to ensure collective leadership of the Chinese Communist Party, and by implication of the Chinese State. The apparent refusal to choose a successor anytime soon underscores the political tensions, which combined with economic stagnation could be potentially destabilising.

Brazil’s economy was driven by exports to China and high petroleum prices, the unravelling of which has led to recession with no signs of recovery, not even little green spouts in any sector. The unprecedented political crisis with the impeachment of President Dilma Rousseff has left it with an unpopular caretaker government that is unable to break the political logjam needed to adopt necessary policies to restructure its economy.

Putin’s political opportunism in the Ukraine and the ensuing economic sanctions would have hurt Russia but when compounded by the collapse of petroleum prices led to a free-fall of the economy. While this has since stabilised, but not recovered, the Russian leadership needs political diversions to retain credibility. The armed intervention in Syria in support of the Assad regime while popular in the short-term could land up bogging Russia down in wars that no one would win. While Putin has adroitly brought, or bullied, Turkey into breaking away from the West insofar as Syria is concerned, the fundamental contradictions in the strategic objectives of both countries would ensure that the alliance is likely to be short-term.

South Africa, a politically correct add-on to the original BRIC, has the smallest, and weakest, economy amongst the BRICS nations. President Zuma is bogged down in corruption scandals and its economy is going nowhere. Other than optics, it has no reason for being grouped along with the others. If Nigeria could get its politics right, and improve its governance systems, it has the potential to become the engine of growth of Africa and a better claim to be seen as a major emerging economy. But that seems some time away.

India, under Prime Minister Modi, is the odd one out for the moment though in sheer impact on the global economy, it would continue to lag China for some time. However, in the short period of just over two years, it has demonstrated the imagination and willingness to create new instruments that has started delivering growth, a far cry from the policy paralysis and crony capitalism of the UPA days. A whole range of activities e.g., re-starting the infrastructure story, the emphasis on skilling India, financial inclusion (Jan Dhan Yojana etc.), improving the investment climate, transparent access to natural resources (think coal, spectrum), cooperative federalism through enhanced devolution of taxes, Goods & Services Tax etc., have changed the mood and image whose real impact would only be felt over the medium term. No wonder, India is, and would remain, the fastest growing large economy for some time.

Expectations of China, India and Russia

In the face of an obvious economic rationale for the group, it is useful to try and understand why these countries meet as BRICS, which is a subset of their world view. China is not just the leading country of this grouping but also the only one with immediate international aspirations. Its actions and policies suggests that it is not in thrall of the existing world order having ridden it successfully to emerge as the second largest power, poses the USA a challenge that the erstwhile Soviet Union could never do. China’s rise, as that of Germany in the last decades of the 18th century is hugely disruptive; the Soviet Union’s heroic role in the defeat of Nazism enables it along with the USA to emerge as the only two real victors of World War, thought at huge human costs. This allowed the Soviet Union to become a very important rule maker of the post-War world order. China’s effort to become a rule maker is not going to be readily accepted as there is no Carta Blanca waiting to be written upon. Its forcible seizure of atolls in the South China Seas and rejection of the verdict of the order of the Permanent Court of Arbitration coming on top of other unilateral actions have caused trepidations in the neighbourhood. And made it less likely to win friends despite the seeming unlimited cash it is rolling out worldwide in infrastructure projects.

India, on the other hand, though hurt by past humiliations has never let history complicate its faith in its future. And since 1991, underscored the need to interact with the world to achieve its ‘manifest destiny’; a tendency strengthened dramatically with the assumption of office by Prime Minister Modi. It has no wish to challenge the international order based on liberal principles of rule of law, even though it would like them tweaked to accommodate its rise, or recovery of past position. Hence the desire to become a permanent member of the United Nations Security Council, of the Nuclear Suppliers’ Group and so on. However, it is not prepared to gatecrash and accepts that it would be though its emergence as a major economic power and as a provider of security in the Indo-Pacific that its case would be taken seriously. It remains prickly about formal alliances and accepts that while there may be strategic congruence with the USA, as there was with the Soviet Union for a while, ultimately each country must pursue its own interests.

For Russia, BRICS like SCO and the attempted Eurasian Union, represents its efforts to remain globally relevant even as economically it is a middle power unlikely to emerge as a major economy. The continued reliance of export of natural produce limits its ability to even retain its traditional markets of Central Asia, which though largely dependent on remittances from Russia, are much more plugged to China economically. Russia itself frequently lands up looking like China’s junior partner; the recent aggressive moves in Syria and challenge to the US should be seen in the light of Putin’s moves at retaining a larger role for Russia in world affairs.

Conclusion

Has BRICS delivered? If no, or not sufficiently, should the grouping continue to exist? The reform of International Monetary Fund’s quotas to better reflect China’s, and to a lesser extent, India’s economic weight, the establishment of the New Development Bank (NDB) and of the Contingent Reserve Facility is considerable achievements. However, the quotas would need further reforms going along and how credible the NDB emerges as a reliable and independent funding agency indicate that the journey is far from over. In fact the establishment of the China-promoted Asian Infrastructure Investment Bank (AIIB), where unlike the NDB, it is the dominant shareholder signals China’s discomfort at having to share power at multilateral forums. On the positive side, the rise of the NDB and the AIIB has forced the World Bank and the Asian Development Bank to simplify its lending norms; these so-called Safeguards were put in place to placate Western NGOs that saw themselves as speaking for the poor of the world since they mistrusted governments of developing countries who the NGOs saw as predatory. As a result, the autonomy of borrowers to frame their own social and environmental policies was seriously compromised. Worse, in effect lending cost went up as borrowers had to undertake various interventions and processes that were time-consuming and costly. This has been slightly rolled back and if NDB and AIIB were to develop into major financiers of development, the World Bank and other multilateral development agencies would be forced to become more sensitive to the needs and circumstances of the borrowers.

Politically, BRICS did coordinate their positions on the Libya issue, preventing a full-fledged international military intervention but failed to prevent the disintegration of the State and the country. Similarly on Syria, the initial discomfort with foreign military involvement finally gave way in the face of the persistent conflict and the rise of the Islamic State. It must be accepted that there are limitations in how politically relevant BRICS as a grouping can ever become. As three of the members (Brazil, Russia and South Africa) have varying degrees of economic dependency vis-à-vis China, they can be left out of the discussion for the time being. China and India have as many issues of dissonance as there are of congruence, with the former becoming larger over the years as China seeks to expand its footprint over areas and issues that threaten India. Internationally, India is committed to freedom of navigation and therefore of keeping the Sea Lines of Communications open. China’s unilateral moves are a serious challenge to this. Regionally, the continued use of Pakistan to keep India bogged down in its neighbourhood and to distract from its growth efforts far from reducing seem on the ascendant with China’s refusal to accept the naming of known Pakistani terrorists and the launch of the China Pakistan Economic Corridor that runs through India’s territory in the illegal occupation of Pakistan. Prime Minister Modi’s best efforts to isolate problem issues from others where cooperation should be further developed have not been reciprocated by the Chinese leadership, yet.

That however does not mean that BRICS should be disbanded or could have no role to play in global affairs. Technological disruption, Climate Change combined with the relative ‘withdrawal’ of the Western societies from globalisation poses substantial challenges to the growth stories and plans of BRICS, particularly China and India. Inward looking USA and the European Union lack the capability and credibility to lead on these serious issues, e.g., e-Commerce, monetary flows, agricultural coping strategies and others. The WTO negotiations seem to be going nowhere, challenged by plurilateral arrangements like Trans Pacific Partnership and the Regional Comprehensive Economic Partnership (RCEP). If the different components of BRICS are to achieve their geo-economic and geo-political goals, this grouping offers them a platform where they can develop common understanding and values that would contribute to global rule-making that is transparent, non-hegemonic and supportive of sustained economic growth. And for that BRICS would have to be sensitive to aspirations of its members and work in a spirit of partnership and equality.

The author is Director, South Asian Institute for Strategic Studies (SAISA). This is an adapted excerpt of key note address delivered at the One Day national Seminar on ‘Brick-Upon-Brick, For a Stronger ‘BRICS’: Challenges and Opportunities’, hosted by the Centre for Latin  American Studies, Goa University with the International Centre, Goa, August 12, 2016

 

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