HPAS/Allied Mains 2022 Answer Writing Challenge Day 236: Model Answer
Question: What is BRICS and how does it contribute to the global economy? (8 marks/120 words)
The abbreviation BRICS stands for Brazil, Russia, India, China, and South Africa. Jim O’Neill, an economist at Goldman Sachs, invented the name BRIC in 2001, suggesting that by 2050, the four BRIC economies would come to dominate the world economy. The grouping was formalised during the first meeting of BRIC Foreign Ministers in 2006. South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS.
Its contribution to the Global Economy:
The increasing role of BRICS in the global economy has come about due to several factors among which the key ones are the economic might of the five countries, the contribution to the reform of international economic institutions and the impact on the transformation of the international monetary and financial systems.
- The BRICS countries account for one-quarter of global GDP.
- Four of the five BRICS members are among the largest countries in terms of population and land area.
- It is predicted that the growth rate of the BRICS member-states which is higher than the global rate will lead to further increase in the share of the five countries.
- By 2030 it will exceed that of the USA and European countries combined, reaching 37% of the global economy. Responsible monetary policy aimed at decreasing the sovereign debt, increasing international reserves, helps to ensure macroeconomic stability.
- The BRICS countries represent 19% of global exports, 16% of global imports, 19% of incoming and almost the same amount of outgoing direct investment.
- BRICS played a decisive role with regard to the reforms of international financial institutions. The coordination of the BRICS countries’ positions facilitated reaching the agreement by the G20 at the summit in Seoul in 2010 on the reform of quotas and management of the IMF and the World Bank: redistribution of quotas of 6% and 5% accordingly in line with the interests of developing countries and having developed by January 2013 a new formula to calculate quotas.
- The most significant contribution of BRICS to reforming international financial system was the creation of the New Development Bank (NDB) and BRICS Contingent Reserve Arrangement (CRA).
- By mid – 2019 the NDB had approved financing of 44 infrastructure projects totaling about 13 billion US dollars, BRICS CRA totalling 100 billion US dollars.
- The BRICS community plays a critical role in setting global economic policy and promoting financial stability, accounting for 17% of global trade and one-third of global GDP.
- The BRICS countries have made significant contributions to global poverty alleviation.
Conclusion: Continued BRICS growth is critical for poverty reduction and decreasing international disparities. Through poverty alleviation and unwavering efforts to bridge inequities, BRICS has recently emerged as the voice of developing countries, or the global South, and has played an essential role in defending the rights of the developing countries of the world.