On the right path

A series of decisions taken at the summit of BRICS countries in Durban have given more solidity and imparted a greater sense of intent to the grouping.

Though there is still uncertainty about the structure, pace of formation and location of a proposed BRICS bank, the idea made further progress at the summit. The proposal for the bank had originally been made by India, and once it becomes a reality it can serve as a financial institution which will meet the needs and aspirations of the developing world. The World Bank and the IMF, dominated by developed countries, have failed in this and the efforts of the developing world to reform them have not been very successful. A new bank oriented to infrastructure development will go long way in meeting the financing and investment needs of emerging economies.

While the proposal has taken a concrete shape there is the need to give careful attention to the details before it becomes a reality. There are apprehensions that China, being the strongest economic power in the group, would dominate the bank. It should not become a vehicle for China to assert its economic and political interests. India and Russia are particularly cautious about this and so want more detailed deliberations on various aspects of the concept and its working. However the idea needs to be pursued in earnest. Another important decision was to create a $ 100 billion contingency reserve  to tackle any financial crisis in the developing world. The need for such fund was felt during the 2008 crisis and is felt even now.

In a globalised world where capital moves freely, developing countries have to create defence mechanisms and institutional devices to insulate themselves from financial vagaries. BRICS represents the strength of the developing world and the grouping will be in a position to dictate terms to the developed countries if they consolidate their strengths. While it is an economic grouping it cannot be oblivious to the politics of international relations. The assertion that the Iran nuclear issue can be resolved only through negotiations was proof of this. The immediate need for BRICS is to set up a secretariat and related facilities so that it grows into a visible institution from a loose grouping that meets every year. In spite of the differences and even rivalry among members it has enough in common to be a decisive factor in the affairs of the world.