|BRICS Summit 2012 Logo|
Leaders from Brazil, Russia, India, China and South Africa met on Thursday, Mar 29, 2012 in Delhi for the fourth annual Summit. Earlier known as BRIC before the addition of South Africa, BRICS is the group of emerging economies around the world, who are exploring new ways of collaboration, collective economic growth and developing common ground on foreign policy.
|Sao Paulo, Brazil|
The summit stressed on linking economies, as in trading in local currencies as well as linking stock exchanges of the member countries. The leaders also stressed on setting up of an international bank on par with Asian Development Bank, IMF and World Bank. It would fund various development projects in member countries and other emerging economies and may act as a relief provider for first time buyer mortgages in case of real financial crisis and disaster. The goal of the bank will also include lending, in the long term, if there comes a global financial crises such as the Eurozone crisis and issuing convertible debt, which could be bought by the central banks of all the member nations. Hence it will be acting as a vessel for risk-sharing.
The idea of setting up such bank was put forward by India, which received a good response from the member countries as well as from the countries who were observing the event carefully. Analyst John Mashaka called India’s move “long overdue”, and said that setting up a bank was a means of “pulling out of the western-dominated World Bank and the International Monetary Fund.” Assistant professor at the Institute of African Studies (China) Yuhua Xiao noted that setting up the bank showed signs of growing self-assertiveness and inter-dependence among developing economies. Dr. Alexandra A Arkhangelskaya noted that creating such a bank would effectively “shift the weight of economic power”, and could also be very beneficial to non-BRICS nations.
|Johannesburg, South Africa|
The nations also signed an agreement to extend credit facilities in their local currencies, a step to reduce the role of dollar between them. As of now, if Russia wants to trade with India, Russia will convert Rubles to Dollars send it to India, and then India will convert Dollars to Rupees. Completely removing the intermediate step of converting to and from dollar is not so easy, but if removed, the trade between the two countries will become independent of what the value of dollar is, which is highly unstable.
Also the nations will be launching a benchmark equity index derivatives that would allow investor of one member country to bet on the performance of stock exchanges of other member countries without currency risk.
Accounted 50% of global economic growth in last decade, BRICS accounts for 26% of global landmass, 42% of the global population and 40% of global GDP.
Below is the tabulation of the countries and their economy in therms of GDP (PPP). The data is taken from CIA World Factbook GDP PPP data update of 2011. PPP is one of the scale to measure difference between two economies. Using a PPP basis is arguably more useful when comparing generalized differences in total economic output between countries because PPP takes into account the relative costs and the inflation rates of the countries, rather than using just exchange rates, which may distort the real differences in income. The table shows BRICS as a single entity is more powerful than European Union. The data for GDP at purchasing power parity (PPP) has also been re based using the new International Comparison Program (ICP) price surveys and extrapolated to 2007. Final figures are estimates in billions of international dollars.
|Rank||Country||GDP (PPP) $Billion||Year|
|—||European Union||15,390||2011 est.|
|1||United States||15,040||2011 est.|
|8||United Kingdom||2,250||2011 est.|
Another method of measuring economy is GDP (nominal) based on official exchange rates. The list below includes mostly 2011 estimates from the CIA World Factbook. The table shows BRICS as the third largest economy after EU and US.
|Rank||Country||GDP nominal $Billion||Year|
|—||European Union||17,720,000||2011 est.|
|1||United States||17,720,000||2011 est.|
|7||United Kingdom||2,370,000||2011 est.|
The performance of the BRICS nations on the international platform has been brilliant, despite the fact all these countries come from different continents, having different government, political and economical structure. How far this concept of BRICS will sustain no body knows, but if it works then it will bring a great change in the current world, a change for good.
The countries have been working together to find some common ground and fortunately their thoughts match on the issues of West Asia, North Africa and Afghanistan. All five countries called for the international community to continue development projects in Afghanistan for 10 years after America led international forces will withdraw from the nation by the end of 2014.
BRICS nations together have strongly condemned the Western world’s politics on Iran to make other countries stick to the restrictions imposed by them on trade ties. China’s Trade Minister Chen Deming said that the “rise [in the price] of crude oil has impacted all countries. The Iran issue has become an issue for all. We need to continue with normal relations with Iran, but, at the same time, we respect UN resolution. We hope that unilateral movement by one country will not affect other countries.” The group warned against any military intervention in Syria by the West or by Israel in Iran. They added that a war with Iran would have “disastrous consequences.”
Out of five BRICS nations, three of them have remained or are super power. India before 14th century, Russia in the 20th century and China almost in 21st century. No matter these countries possess power and wealth, but they may not share good relations with each other. Brazil and South Africa being geographically isolated from these nations share good relations with all. The best example is China and India, both of them have faced each other in the war in 1965 and China is still occupying a large part of North India and claims some part of Indian territory in North East India. China was also about to open the front in Indo Pakistani war in 1971 but didn’t do so, fearing Pro Indian Soviet Union might take action against them. Russia and China have also shared cold relations following the illegal migration of Chinese in Russia’s far east and border dispute which was recently resolved.
Russia and India have been sharing good relations from the Soviet times. India also shares good relations with South Africa, one of the major reason being Mahatma Gandhi, whose work in South Africa promoted equality between blacks and whites. In South Africa, Mahatma Gandhi is equally respected as in India. Brazil has also been close to all the countries.
Leaving aside all these solid claims about BRICS, there are critics as well who discuss why BRICS might fail with some genuine facts. One of the reason is all these countries come from different continents, different social, economical and political systems and some of these countries do not share good relations as well as common ground.
One of the best example of this claim is that after the declaration of setting up of an International bank, these countries fear that China will be the most benefited country out of all and will enjoy the most.
However, just after the summit was over, India and China declared that they will keep their border issue aside for now and will take more steps to increase trade between the two neighbors. Indian government also expressed their interest in inviting Chinese investment in India’s manufacturing sector. Both the countries have together declared this year as Indo Chinese year of friendship and cooperation.
After the summit, Brazil and India also took the opportunity of exploring their way of cooperation. The two countries signed six pacts in areas ranging from closer cooperation in science and biotechnology to cultural exchanges. Under a signature, Brazilian initiative Science Without Borders, the two sides inked a pact that envisages placement of Brazilian students and young researchers in India. It will be funded by Brazil.
US State Department spokesman Mark Toner said, “We reviewed the leaders’ Delhi declaration and believe that their efforts to engage in global multilateral institutions productively can only strengthen the international system. United States welcomed the efforts by the so-called BRICS — Brazil, Russia, India, China and South Africa — to support the recovery of the global economy as well as “
Creating Perceptions: What is Really Happening with the Indian Economy?
In just a little over a year, Indians will take to the polling booths again to decide whether the Narendra Modi led BJP (Bharatiya Janata Party) government’s much anticipated second term as the ruling party will become a reality or not. Even though the present government has always been the favourite to retain its position, a heightened focus on the health of the Indian economy may or may not be in their best interest, and it all depends on which picture Indians choose to accept.
One picture, two different outlooks
IMF (International Monetary Fund) chief Christine Lagarde said earlier in October that “for the medium term, we see a very solid track ahead for the Indian economy”, assuaging some of the disconcertedness that has surrounded the Indian economy post two of the boldest moves ever attempted by any government since independence in the country: demonetisation and a massive rollout of the GST (goods and services tax) earlier in the year. The lingering effects of the disruption caused by these steps resulted in India’s GDP growth slowing down again in the latest quarter to 5.7%, with the country playing second fiddle to China, again. However, Lagarde has lauded the steps taken by the Indian government to digitise the economy and simplify the tax regime, dismissing any surprises in the drop in figures as “a little bit of short-term slowdown” which was to be expected following the government’s “monumental effort”.
Moreover, during his visit to the US to meet with investors and corporate leaders, Minister of finance Arun Jaitley reflected that there is a “positive mood” about India in the US, adding that Americans have a good understanding of the actions taken by the government and what they will lead to. That may very well be the case, but the picture of the economy within the borders is far less pronounced, and the division of its state among the citizens far more.
Soon after the figures for growth were in for the latest quarter, India’s former minister of finance Yashwant Sinha, who is also a member of BJP, singlehandedly contributed hugely to the already dwindling confidence of the public in the government’s approach when he wrote in a letter in his column on The Indian Express about “the mess the finance minister has made of the economy.” Citing issues ranging from the decline in private investment and distress in the agricultural sector to the loss of jobs across different sectors, he has blamed demonetisation and a poorly implemented GST for the poor state in which the economy finds itself. Consequently, the past month has seen a flurry of editorials and opinion pieces on what the true picture is of India’s economy, where it is headed, and whether the fears of the people are warranted or if these tiny setbacks will finally be followed by the promised prosperity.
The problems are real, but what are they?
Agriculture was one crucial sector of the economy hit badly. The agrarian crisis has worsened due to an unsatisfactory monsoon season after farm loan waivers were granted following massive protests across states. On the other hand, the GST rollout has hit hard the small and medium businesses which were vastly unprepared to cope with the government’s move. While the GST council meet earlier in October may have eased the tax burden on the SMEs, it is still some way to go before they can be pulled out of what Mr Sinha accurately describes an “existential crisis”. An improvement in growth would also require a timely recovery from the supply shock caused by the implementation of the GST, in the absence of which it would be more realistic to expect more quarters of slow growth. Another major problem is the dearth in the investment by the private sector with an increase in stalled projects for the fifth consecutive quarter. This, along with other engines of economic growth including private consumption has shown slowing signs as well. The government may argue that when they inherited the economy it wasn’t in its best shape either, but demonetisation and now GST, no matter how ambitious have created a scare among the people leading to alarms of low confidence ringing across all major sectors, which needs to be addressed.
The biggest concern perhaps for the government is the lack of jobs created. One of the promises made by the Modi government during the elections was the creation of millions of jobs. However, according to the Centre for Monitoring Indian Economy the workforce declined from 406.5 million at the end of last year to 405 million till April this year. Almost every indicator points out to a net loss of jobs for the year 2017. The telecom, construction, and textile industries among others have also laid off a large number of their workforce. A broken promise on this end is unlikely to be forgiven and forgotten that easy.
Where the government is right
As is always the case, the analysis here as well is a two-way street. To the credit of the government, some positive signs have shown with the first tax collection under GST exceeding government’s expectations of Rs. 91,000 crore. Other sources also show a bit of a revival in consumer spending. Moreover, irrespective of the expected duration of the slowdown, PM Modi has recognised the need to tackle some of the most prominent issues that plague the economy in order to get it back on track. It is for that purpose that the Economic Advisory Council to Prime Minister has been set up consisting of experts chosen by Mr Modi himself. “There is a consensus amongst us that there are various reasons that have contributed to a slowdown of growth rate. Our entire thrust would be on implementable decisions”, said the Council’s chairman Bibek Debroy. The EAC or EAC-PM has identified 10 issues to tackle in order to launch the economy towards a higher trajectory of growth. These are inclusive of but not limited to the areas of agriculture, the informal sector in the country, job creation, public expenditure, and monetary policy among others. The need for instituting an Economy Track Monitor has also been realised by the Council to suggest correct courses of actions based on heavy and informed assessments.
Making it right: which path to follow
What can the government do? What should be done? Division exists on the suggested courses of actions as well. One of the solutions to the problem would be an increase in the government spending, a suggestion that has found the support of many policymakers throughout the country. That, however, is not without its problems. The central bank has warned that such a fiscal stimulus may come at the cost of macroeconomic stability and even the EAC seems not to be in favour of it. The government also wants to stick to its fiscal deficit target of 3.2% of the GDP and is unlikely to trade off some of this stability for growth. In the event that it should achieve neither, it would be further behind the starting line, not making for a flattering image before the next general elections.
If not a fiscal stimulus, then what is the alternative? The answer is policy reforms in those sectors of the economy that have been plagued with poor performance in terms of both employment and growth – textiles, real estate and construction, and leather among others. A report from JP Morgan suggests that the government should focus on fixing the supply chains that were disrupted first due to demonetisation and then the GST by improving the regulatory framework for SMEs. Resolving the problem of non performing assets in banks is another area that the government needs to set its sights on. The EAC, in its next meeting may look at the sale of government stakes for the recapitalisation of banks as the right step to take.
Time prevails over all
“It is a mistake to think that there is some magical, perfect way to run a large-scale complex system like an economy”, says Jitendra Singh, emeritus professor of management at Wharton, on the subject of the growth of the Indian economy. Yashwant Sinha expressed the same sentiment while concluding his letter when he mentioned: “nobody has a magic wand to revive the economy overnight.” The problems that the Indian economy is facing did not start with demonetisation and GST, they were already headed this way. These steps may have accentuated some of the many problems that have slowed growth but it is also true that an excessive and undue amount of attention is being placed on them. The real problems of the economy are the ones that the EAC to PM Modi hope to tackle and only time will tell what the government is able to do. Unfortunately, time is what is most scarce for the government.
Changing The Rules of the Game: What to Expect When Social Media Dictates the News
Till about five years ago when I was still in high school and without a smartphone, a single faint thud against the front door every morning at roughly 7 AM would signal the arrival of the daily news digest for everyone in my house including myself. Even though I rarely read beyond the sports section and was more or less updated on every development with my favourite leagues, devouring those few pages was a daily ritual. Today, the newspaper arrives every morning in the same fashion and while the ritual has remained unchanged for most of my family, the need, as well as the want for it, does not exist for me.
My story is a phenomenon that resonates with millions of families across the world. The sources from where we get our news and the way we read it has been rapidly changing, in more ways for some than the others. When Pew Research Center conducted a study on ‘The Modern News Consumer‘ across the United States, it was found that 50% of adults from the ages of 18-29 get their news online, followed by television, radio and lastly with only 5% from print newspapers. Television was still reported to be the most dominant source of news among all age groups taken together. However, since it was mostly the choice of the older population, further changes over the next few years should be substantial and rapid. In another survey conducted by Pew this year, it was noted that about 67% of adults in the United States were getting at least some of their news from social media. While the numbers projected above are for the United States, there is no denying that an increasing population of young adults worldwide is getting more and more of its news from social media, and the same is intuitive given the average time a teen spends on social media is up to roughly two hours per day. The important questions however are:
1) whether social media is capable enough to take the baton as the foremost source of news and also
2) whether we as consumers of news are equipped enough to differentiate between what is news and what’s not.
Facebook, fake news, furore!
“Social media already provides more diverse viewpoints than traditional media ever has”, wrote Mark Zuckerberg in his 6,000-word manifesto in February this year on how Facebook plans to make the world better. There is little reason to doubt what he says. However, there are two sides to this coin as well since “the two most discussed concerns this past year were about diversity of viewpoints we see (filter bubbles) and accuracy of information (fake news)”, he also mentioned in the same address citing that alternate perspectives do not necessarily contribute to news and there is a need for a complete picture. Still, the greater evil here perhaps is the inaccuracy in information or what Zuckerberg calls it – ‘fake news’.
Zuckerberg’s address came soon after Facebook received heavy backlash for its role in the spread of fake news meant to divide the Americans ahead of the presidential elections. If that wasn’t enough to deal with, the pressure was sure to mount on the most popular social media site when it was caught in the midst of another incident relating to the spread of misinformation. Facebook’s safety check feature kicked in for citizens in Bangkok in December 2016 when an erroneous article about a bombing in a nearby shrine went viral. For users in the region, such a mistake can cause a pandemonium. With Facebook falling victim to the fake news again, the world was left evaluating their sources of consumption of news.
Trump’s tussles over Twitter
Let’s take a turn back to the United States yet again but away from Facebook. According to the same study conducted by Pew, about 74% of Twitter users have said that they receive their news from the social media site itself. Twitter allows you to keep a close tab on people you follow, and the problems associated with Facebook are largely avoidable. However, what happens when you are barred from following the president of your country on Twitter? Midway through the year, Donald Trump was sued by a free-speech group when he blocked a number of accounts on the grounds of criticism and dissent. With the White House spokesperson stating that tweets from Trump’s personal account were to be considered “official statements by the president of the United States”, the move was called unconstitutional and in violation of the First Amendment. The question then arises, will Donald Trump’s twitter account be treated as an official one, or despite the remarks from the White House will it be considered a personal one, in which case he may be allowed to block anyone from his account, just like any other person.
Just like Mark Zuckerberg had to shoulder responsibility for the unprecedented burden that social media all of a sudden now carries in disseminating the news, so did Twitter co-founder Evan Williams, although his role was different and just limited to admission of self-perceived guilt. Recognising that Twitter may have played an important role in having Trump elected as president, Williams publicly apologised when he said, “It’s a very bad thing, Twitter’s role in that. If it’s true that he wouldn’t be President if it weren’t for Twitter, then yeah, I’m sorry.”
Sharing the burden is your choice to make
Zuckerberg and Williams, among others, have been at the centre of a phenomenon where social media has taken over reporting and while Facebook, Twitter and other social media sites keep working on filters, resolutions, and artificial intelligence to help overcome the set of issues that this wave has brought with it, it does not mean there is no role for us to play. We are not all fed the same information as we were until a few years ago in the form of newspapers. Today we have fountains of news, information and opinions at the distance of a click, a tap or a scroll. Unfortunately, that also means that not everything that comes across our way is genuine, or to our liking, or even what we may be looking for. To that end, developing habits of open-mindedness, fact-checking and impartiality is imperative on our part.
When we are biased in favour of or against a particular idea or entity, we are often willing to skip checking of facts from sources we may feel are dubious or biased themselves if the news suits our allegiance on the matter. That is where impartiality jumps in. For example, as a young Indian adult when seeking an update on the situation in Kashmir I am aware that the dailies of the two different countries (India and Pakistan) may be under the political influence to portray the news as per the wishes of their respective countries’ governments. Keeping that in mind I may opt to read news from sources from both the countries individually, or maybe just not get carried away with the political undertones in the report from either of them to paint the opposition in a bad light and focus just on the facts. Similarly, while reading an article on the border dispute between India and China on the Chinese daily Global Times, I have to keep in mind the controversial journalism and the pro-government stance that the daily is often known to take, or perhaps get my news from some other source.
Social media has opened the doors to information and connectivity like never before for people all over the world. In the strife to make different platforms for dissemination of news better equipped to make us even better informed, we would do well to strive to also keep ourselves toe to toe with it.
A Lovers’ Quarrel: What Now for India and China?
When China’s Consul General to India Zheng Xiyuan addressed a gathering in the city of Mumbai earlier in the week he made an interesting comparison on the relationship between the two Asian giants. “Relation between China and India is just like the monsoon season,” he said. “There are different levels of rainfall in different years. And sometimes you have clouds as well.” It is not surprising how apt the statement is especially with regard to the past three years which have seen the tiger and the dragon compete for geopolitical influence in Asia and beyond and tussle over longstanding territorial issues. The latter of the two culminated in the 70-day long military standoff in Doklam/Donglang, which has since then deescalated. However, the monsoon sometimes surprises with a few delayed showers, and so has Beijing with a sudden change in its rhetoric towards New Delhi, from one of visible aggression to one which is seemingly cooperative.
Clashes between the two kept analysts across the globe busy, with the possibility of a full-scale military conflict a favourite topic of discussion for the political enthusiasts among the uninitiated. The Doklam episode was the final among a series of recurring conflicts. The most prominent among them included India snubbing China’s One Belt One Road (OBOR) summit in May flagging sovereignty issues due to the China Pakistan Economic Corridor (CPEC); a key portion of the OBOR which runs through a region of Kashmir controlled by Pakistan and claimed by India, and China’s repeated blocking of India’s move to get the chief of Pakistan based terror group Jaish-e-Mohammed listed as a global terrorist with the UN. The relations had already taken a downturn with India’s entry into the Nuclear Suppliers’ Group being blocked by China on a consistent basis. Added to that, tensions reached a high with India’s decision to allow the Dalai Lama, seen as a separatist by China to visit the Tawang region which is claimed by China as Southern Tibet and by India as a part of its state Arunachal Pradesh. This happened despite repeated warnings from the Chinese that the visit would cause serious damage to diplomatic ties between the two countries. Did it?
The action-packed episodes are in the past now and recent developments on the world stage are worth a second look. With no new conflicts brewing for the time being and a precarious lid on the existing ones, it has been nothing short of intriguing to see the evident tone of cooperation between the two frenemies since the Doklam issue has been resolved. China seems to have made good, even if ever so slightly, on blocking the move to designate the JeM chief as a globally designated terrorist by condemning the Pakistan based terror group along with the Haqqani Network and Lashkar-e-Taiba at the recent BRICS summit held in Xiamen. While the move has likely and arguably been made to protect its own investments in the country and doesn’t have any visible bearing on India’s repeated efforts as yet, the step is significant in projecting Beijing’s new viewpoint on the fight against terror based outfits on a global level which previously was limited to vague statements sighting requirement of solid evidence and further communication and coordination between the involved countries. Beijing has also snubbed Pakistan in its effort to internationalise the issue of Kashmir, maintaining its position that the matter is for them and India to resolve on their own. While there has been no change of position on the issue from before and there is no strain of ties between the two ‘all-weather allies’, the tone of the statement is a change to be welcomed by New Delhi in its prominent stand against terrorism on both the national and international level.
Speaking of change, India along with Japan remained relatively quiet in the South China Sea conflict, making no explicit mention of it in their joint statement when the Prime Ministers of both the countries met earlier this September. Improvements in ties aside, another likely reason could be that the issue has taken a backseat with the focus of China, Japan as well as that of the United States on the heightening tension in the Korean Peninsula.
However, with Trump’s undiverted attention on Kim, the South East Asian countries involved in the conflict may find it difficult to stand up to the Chinese on their own, should Beijing choose to push even further with its activities in the contested waters. Therein lies an important lesson for India. “The Chinese have demonstrated a pattern of creeping encroachment”, India’s former Ambassador to Beijing Ashok K. Kantha has said, and India would do well to remember that. Indians may see the disengagement from both the sides in Doklam as a diplomatic victory over the Chinese but the conflict is not yet resolved. China’s perceived soft behaviour may merely be an understanding on their part that perhaps the time to act is not now, more so that cooperation is the way ahead; something which has continuously and explicitly been implied by both the sides over and over considering what else is at stake.
As two large and quickly growing economies, India and China’s relationship with each other has been heavy enough invested in by both the countries for them to know different. This is not just evident from the business end, but also from the mixing of the two cultures as well. Bollywood movies are enjoying huge popularity among the Chinese audience. At the same time across the border, Mandarin as a language has acquired more importance over the years, with schools offering the same as an optional language growing in number. Opinions of the people on each other may change every now and then from favourable to not as much in polls, yet there is no denying their mingling.
In this lovers’ quarrel, as is with any other, while the occasional bickering is unlikely to give way (at least in the foreseeable future), reconciliation is perhaps always the key and a quick one for that matter. This is known by both, even if they may forget from time to time.
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