Third concept, August 2013,pp7-12.

BRICSs Rising Growth Potential

Prof. R.K.Srivastava*
[Recognizing the force of globalization which led to creating new power centers in
the world economy, an attempt has been made to identify the factors that have been
propelling BRICS as an economic power. The emergence of BRICS (Brazil, Russia,
India, China, and South Africa) is the reality in the 21 st century which has seized
economic power in the global economy. The combined share of BRICS represents
8% of worlds area territory, 42% of worlds population and nearly 27% of the total
global GDP in terms of PPP. China is the global hub of factories, while India is
regarded as the services capital of the world. Before and after global economic
recession in 2008 and 2009, BRICS has successfully displayed its economic
muscles. But there are some loose ends in this new entity which have to cope up at
the urgent basis.]

BRICS is an international political organization of leading emerging economies

arising out of the inclusion of South Africa into the BRIC group in 2010.1It is a
platform for dialogue and cooperation amongst countries that promotes peace,
security and development in a multi-polar, inter-dependent and increasingly
complex, globalizing world. BRICS represents Asia, Africa, Europe and Latin
America, the transcontinental dimension of our interaction adds to its value and
significance. As of 2012, its five members are Brazil, Russia, India, China
and South Africa 2 with the possible exception of Russia. 3 The BRICS members are
all developing or newly industrialized countries, but they are distinguished by their
large, fast-growing economies4 and significant influence on regional and global
affairs. The combined share of BRICS represents 8% of worlds area territory, 42%
of worlds population and nearly 27% of the total global GDP in terms of PPP.
BRICS has witnessed an exponential increase in its importance at the global
economic platform since the turn of the new millennium. The resilience of the
BRICS economies in the wake of the global economic crisis has put them at the
forefront of the global economic affairs.
The BRICS alliance has existed as a concept since 2001, when Jim ONeill a
Goldman Sachs economist, identified Brazil, Russia, India and China as rising
economic powers and argued that they should play larger roles in global economic
policymaking, perhaps by joining the established Group of 7. Earlier, in the 1990s,
Russia had already organized a triangular group with India and China known as
RIC but the attention generated by Mr. ONeills formulation apparently
prompted these three to add Brazil and create a new political club. 5 The first BRIC
summit meeting was held in Yekaterinburg, Russia, in 2009, amid the uncertainty in
Dept. of Economics, HNB Garhwal University, Campus Badshahithaul, Tehri,
Uttarakhand E-mail: prof.sri2009@gmail com.

the global economy. Subsequent meetings were held in Brazil and China. South
Africa joined in 2011, because of its growing significance in the world economy.
The new acronym is, therefore, BRICS and it symbolizes the Brazil, Russia, India,
China, and South Africa. The fourth annual BRICS summit was held in New Delhi
on 29th March 2012. The summit came out with Delhi Declaration on March 29,
2012.The Declaration focused on all pertinent issues ranging from Euro-zone crisis
to sustainable development and G-20. It also discussed political situation in West
Asia stating that our objective is to facilitate a Syrian-led inclusive political
process, and we welcome the joint efforts of the UN and the Arab League to this
end. The idea of having a BRICS Development Bank was also discussed with a
view to develop modality for its establishment.
On the other side, the world economy is still in doldrums because of:
Advanced economies are in slow growth orbit
Euro-zone is in near to recession
Emerging economies like BRICS have slowed down
During the period, 2008 and 2009, when economic recession had taken many
countries especially advanced in its grip. Millions of Dollar has been pumped in the
world economy to cure recession. A major portion has landed in the emerging
economies. The problem may become more complicated when Portfolio managers
make a decision to re-allocate the money. In fact, at a given point of time the
economy has the capacity to absorb only a given amount of capital. But, excess
capital inflows can create following problems and it is also true in the vice-versa
case: 6, 7
Sharp increase in money supply
Inflation
Forex markets may become volatile ,therefore, trading activities would
tend to become speculative-nature
Monetary management become difficult
Growth rate of the economy may become difficult to maintain.
Under these circumstances, it has become clear that a lot of economic ills associated
with economic recession are still prevailing in the world economy. But Global
Financial Institutions like IMF, World Bank, etc ---Western dominated institutions
are unable to take prescriptions in the light of the problems of emerging economies
like BRICS. The nature, needs, challenges, remedies of BRICS economies are quite
different to advanced countries. In the same way, trade prospects especially exports
to advanced countries are not bright in the short-run. Tempo of FDI inflows into
BRICS economies may also see rough weather. And, there is no option left to
BRICS economies to deepen their economic ties via trade, capital, etc, if they wish
to maintain their growth momentum. Therefore, an attempt has been to identify the
factors that have been propelling BRICS as an economic power in the global scene.

Growth Profile
BRICS countries comprise almost 8% of the world area of territory. Four countries
figure among the top ten with Russia, China, Brazil, India and South Africa in 1 st,
3rd, 5th, 7th, and 25th places respectively. These countries represent 42% of the
worlds population (Table 1). They represent some of the following special features,
therefore, got the largest feature in the world:

Russia is the largest country in the world

China is the largest country in the Asia
India is the largest democratic country in the world
Brazil is the largest country in South America and Southern Hemisphere

Table 1: General Information of BRICS Countries (2011)

Country

Brazil

Area of Territory
Rank
In the
Area
world
(1000
sq
km)
5
8515

Russia

17098

3.4

122

143

India

3287

0.6

156

1210

China

9600

1.9

122

1344

South
Africa

25

1221

0.2

--

24

50.6

Sources:

%
of
world
territory

Area of
cultivated
land
(million
hectares)

Population
Rank
In the
world

Population
(million
persons)

1.7

65

191

(1) BRICS Joint Statistical Publication 2012

(2) List of countries and dependencies by Area- Wikipedia
(3) CIAThe World Fact book
(4) List of countries by Population--Wikipedia

As a result, these countries have own vast natural resources. Brazil is extremely rich
in resources such as coffee, soybeans, sugar cane, iron ore, and crude oil, with
around 65 million hectares of arable land (just 7% of its land area) but with an
agricultural area of 31.2 % of the total land area. Russia is noted for its massive
deposits of oil, natural gas, and minerals. India is a strong service provider with a
rising manufacturing base, while China is seen as the manufacturing workshop of

the world with a highly skilled workforce and relatively low wage costs. South
Africa is the 25th largest economy in the world, with a GDP of US$0.6 trillion. It is
a medium-sized country with a total land area of slightly more than 1.2 million sq.
km and around 12% arable land area. It is the worlds largest producer of platinum
and chromium and holds the worlds largest known reserves of manganese,
platinum group metals, chromium, and vanadium. South Africa generates 45% of
Africas electricity and the South- African power supplier provides the 4th cheapest
electricity in the world.8 Thus, BRICS economies have now emerged as an
economic force. Their combined strength is being well-recognized. As of 2011, the
five BRICS countries account for nearly 26.7% of the total global GDP in terms of
PPP. If one compares the GDP (PPP), four countries figure among the top ten with
China, India, Russia, Brazil and South Africa in 2 nd, 3rd, 6th, 7th and 25th places
respectively. China and India have managed to overtake well-established economic
super-power like Japan. In GDP (PPP) terms, China and India are now behind only
the USA. But BRICS countries are still far behind per capita GDP in terms of PPP.
For example, in 2011, USAs per capita GDP (PPP) was US$48387 against Brazils
US$11769, Russias US$16736, Indias US$3694, Chinas US$8382, South Africas
US$10973. This reflects in their rankings in per capita GDP. Their rankings in world
per capita GDP are recorded as Brazil (75), Russia (53), India (129), China (92), and
South Africa (78) (Table 2). More interesting, if we compare the performance of
BRICS economies Vs. Advanced economies, it is found that BRICS has been
seizing a larger share in World GDP. For example, Indias share of world GDP
(based on purchasing power parity) has risen from 4.66% in 2007 to 5.7% in 2011.
Over the same period, Chinas share has gone up from 10.98% to 14.32% and
Brazils from 2.78% to 2.90%. Russia and South Africas share of global GDP,
however, have fallen a bit. Clearly, the performance of the Indian economy, despite
the policy paralysis, the high interest rates, the fiscal deficit et al, compared with the
BRICS has been rather good.
Table 2: Gross Domestic Product and Per Capita GDP of BRICS in 2011
Country

GDP in PPP
(US$ trillion)

Share in
Worlds
GDP (%)

Per Capita GDP (PPP)

Rank in
the
World

Per Capita
GDP
(US$)

GDP(US$
trillion)

Brazil

Rank
in the
World
7

2.3

2.9

75

11769

Russia

2.4

3.0

53

16736

India

4.5

5.7

129

3694

China

11.3

14.3

92

8382

South
Africa

25

0.6

0.8

78

10973

Source: World Economic Outlook Database, April 2012, IMF.

BRICS economies are four of the most dynamic economies in the world. China
(+9.2%) and India (+6.9%) are among the worlds fastest growing economies,while
Gross World Product (GWP) grew 3.6% in 2011.9 But all the BRICS countries have
faced downward trends in growth rates. The different problems for this pitfall are
cited, for example, in India it is mainly due to policy paralysis at Govt.s level; in
China it is cited to sluggish demand of its exports in the world market. According to
IMF data, for example, in 2007 Chinas GDP expanded by 14.16%; in 2012 it is
expected to grow by 8.2%. The Indian economy expanded by 9.99% in 2007, it will
grow by 6.9% in 2012. Brazil grew by 6.09% in 2007, it will grow by 3.02% in
2012.The Russian economy expanded by 8.5% in 2007, and it will grow by 4% in
2012. South Africa grew by 5.54% in 2007; it will grow by 2.65% in 2012.
Due to emergence of developing countries, the share of developed economies in
world merchandise exports has declined from 66% in 2000 to 54.2% in 2010. At the
same time the share of BRICS countries in world merchandise exports has increased
from 7.6% in 2000 to 16.4% in 2010. In the sphere of world service exports, the
developed economies are still playing a dominating role, though their share in world
service exports has declined from 85% in 2000 to 79% in 2010. On the contrary, its
share in world services of exports has increased from 4.2% in 2000 to 9.6% in 2010.
The presence of China in worlds merchandise and services exports is particularly
increased. The share of China in global merchandise exports increased from 3.9% in
2000 to 10.4% in 2010, whereas its share in global services exports increased from
2% in 2000 to 4.5% in 2010. On the other side Indias share in global merchandise
exports increased from 0.7% in 2000 to 1.5% in 2010 and its share in global
services exports increased from 2.0% in 2000 to 4.5% in 2010. Therefore, India is
far behind to China in the area of exporting goods and services to the world market,
but India is leader of IT services.
The BRIC thesis recognizes that Brazil, Russia, India and China 10 have changed
their political systems to embrace global capitalism. Goldman Sachs predicts that
China and India, respectively, will become the dominant global suppliers
of manufactured goods and services, while Brazil and Russia will become similarly
dominant as suppliers of raw materials. It should be noted that of the four countries,
Brazil remains the only nation that has the capacity to continue all elements,
meaning manufacturing, services, and resource supplying simultaneously.
Cooperation is thus hypothesized to be a logical next step among the BRIC because
Brazil and Russia together form the logical commodity suppliers to India and China.
Thus, the BRIC have the potential to form a powerful economic bloc to the
exclusion of the modern-day states currently of Group of Eight status. Brazil is
dominant in soy and iron ore, while Russia has enormous supplies of oil and natural
gas. Goldman Sachs' thesis, thus, documents how commodities, work, technology,
and companies have diffused outward from the United States across the world.11

Goldman Sachs argues that the economic potential of Brazil, Russia, India, Mexico
and China is such that they may become the six most dominant economies by the
year 2050. They would change the economic and political equations in the world
economy. BRICS will play locomotive of the worlds growth. Using the latest
demographic projections and a model of capital accumulation and productivity
growth, Goldman Sachs map out GDP growth, income per capita and currency
movements in the BRIC economies until 2050. The results are startling. If things go
right, in less than 40 years, the BRIC economies together could be larger than the
G6 in US dollar terms. By2025 they could account for over half the size of the G6. 12
Currently BRICS economies have become four of the most dynamic area in the
world. China (+9.2%) and India (+6.9%) are among the worlds fastest growing
economies, while Gross World Product (GWP) grew 3.6% in 2011, according to
CIAThe World Fact book.
Challenges
BRICS is a new group, and some analysts argue that with time it could become a
more cohesive alliance. But for now, it is troubled by internal rivalries and
contradictions that have stymied the groups ability to take any significant action
toward a primary goal: reforming Western-dominated international financial
institutions. Deutsche Bank Research said in a report that "economically,
financially and politically, China overshadows and will continue to overshadow the
other BRIC." It added that China's economy is larger than that of the three other
BRIC economies (Brazil, Russia and India) combined. In short, the challenges are:
13

BRICS countries subscribe to different values.

The rest of the BRICS abhor Chinas rise.
Russia is a declining country and doesnt have much in common with
the rest of the BRICS as a significant player in the world economy, apart
from its vast energy reserves.
Therefore, BRICS countries arent natural allies.
Indians are frightened of encirclement by China and are full of angst about
the very big imbalance between them, although they have lots of
economic interests in common.
China, in turn, is concerned about the specter of a US-led Asian alliance
arrayed against it, which Includes India.
South Africa is struggling to sustain growth; Russia remains volatile;
Brazil shows promise, while China and India are massive countries with
extraordinary potential and highly impressive records. The BRICS isnt a
natural grouping.
These are the roadblocks which can hamper BRICS forum. It would be better that
political rivalry/tension should be sorted out in urgent basis. Other-wise these
problems can become headache in the emerging block.
Conclusion
6

In the globalize-world, every thing including development arithmetic has been

changing at a fast rate. New economic power centers have emerged in the world
economic scene. The BRICS alliance has existed as a concept since 2001, when Jim
ONeill, a Goldman Sachs economist, identified Brazil, Russia, India and China as
rising economic powers and argued that they should play larger roles in global
economic policymaking. Goldman Sachs argues that the economic potential of
Brazil, Russia, India, Mexico and China is such that they may become the six most
dominant economies by the year 2050. And the BRIC economies together could be
larger than the G6 in US dollar terms. By 2025 they could account for over half the
size of the G6.
BRICS as a forum is recently launched. The first BRIC summit meeting was held in
Yekaterinburg, Russia, in 2009. In 2010 South Africa was inducted therefore, it has
become BRICS. Since then four summits were held and latest one was held in 29 th
March 2012. BRICS economies are four of the most dynamic economies in the
world. China (+9.2%) and India (+6.9%) among the worlds fastest growing
economies, while Gross World Product (GWP) grew 3.6% in 2011. The combined
strength of BRICS is summarized as:
8% of worlds area territory
42% of the world population including two most populous country in the
world
27% of the GDP in terms of PPP; four countries figure among top ten with
China(2nd ),India(3rd), Russia(6th), Brazil(7th) and South Africa(25th)
16.4% of world merchandise exports; China is the hub of manufacturing
9.6% of worlds services of exports; India is regarded as the services capital
of the world.
In the meantime, we should not forget roadblocks which are confronting BRICS
forum. Accordingly, the challenges before BRICS have been listed.
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