BRICS Summit 2023: What To Watch Out For?

India

oi-Madhuri Adnal

The upcoming BRICS Summit is scheduled to occur from August 22 to 24 in Johannesburg, South Africa. The gathering will be attended by the leaders of India, China, Brazil, and South Africa, with Russia represented by its foreign minister.

This year's BRICS Summit takes place against a backdrop of significant geopolitical shifts, with Russia and China assuming prominent roles. Russia's economy has been impacted by Western sanctions, resulting in a weakened rouble due to decreased exports and capital outflows. In contrast, China is grappling with an economic dispute with the United States while experiencing its most substantial downturn in four decades.

Anticipations are that the forthcoming BRICS summit will emphasize enhanced economic collaboration to navigate uncertainties arising from the Ukraine conflict and the global economic deceleration. The Johannesburg summit presents an opportune moment for the coalition of emerging economies to challenge prevailing perceptions of its "irrelevance."

BRICS Expansion

Attention is now directed toward the possibility of expanding the group by adding 40 more countries, including Argentina, Iran, and Saudi Arabia. Advocates of expansion argue that this move could counterbalance the influence of the US-led Group of Seven on the global economy. Such expansion could ensure the continued significance of BRICS in the global order and provide an alternate source of financing for developing nations. However, the expansion could also be interpreted as China's bid to establish itself as the leader of the developing world, potentially unsettling its rival, India.

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China's De-dollarisation Strategy

The plan to expand BRICS membership is closely intertwined with China's pursuit of de-dollarising global trade. China aims to eventually replace the US dollar with other currencies. Despite its efforts, the US-China economic rivalry suggests that Beijing intends to promote the yuan as an alternative to the US dollar. Notably, two BRICS members, Brazil and Russia, are already transacting with China in yuan. Nevertheless, the US dollar remains the predominant global reserve currency, constituting around 80% of global trade.

BRICS Common Currency

China's aspirations for the yuan may encounter obstacles. India, a regional competitor of China that envisions a prominent global role for the rupee, is unlikely to favor the yuan's ascendancy as a major reserve currency. Given the complex political dynamics between the two neighboring nations, India's reservations are understandable. While the group has expressed the necessity of reducing reliance on the US dollar, discussions regarding a proposed common 'BRICS currency,' initially suggested by Russia and Brazil, are unlikely to occur at the upcoming summit.

Enhancing Trade with Africa

A significant portion of the discussions will likely center on deepening trade connections with African countries. The BRICS alliance is poised to explore greater opportunities within the continent, which is seen as a largely untapped market, through the African Continental Free Trade Area. China, particularly, is already Africa's primary trading partner, with trade projected to exceed $500 billion by 2030.

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BRICS Economic Potential

With a combined population exceeding 40% of the world's total, BRICS represents a vast untapped market. The collective GDP of the five member nations accounts for over a quarter of the global Gross Domestic Product. Foreign investments into BRICS nations surged fourfold between 2001 and 2021, propelling economic growth, according to a UN report.

The BRICS economies contribute 18% of global exports, signifying substantial room for increased trade between member states. Expanding the BRICS alliance could not only stimulate global trade but also bolster the group's economic significance. Projections suggest that an expanded BRICS could contribute more than 50% of global GDP by 2030.

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Story first published: Tuesday, August 22, 2023, 10:05 [IST]