Viewpoint: India - a BRIC between China and US
Economic activity is unmistakably shifting towards emerging economies.
In the last 50 years of the 20th century, the Western economies came together because they were leading the growth process. Now there has been a paradigm shift.
Goldman Sachs, the institution which coined the acronym BRICs to define Brazil, Russia, India and China as a formidable economic grouping, says that by 2050 the bloc (BRICS now includes South Africa) will overtake the GDP of all developed economies including Japan.
India has already started producing more additional GDP than Germany, and China is contributing more to the world economy incrementally than even the United States.
At the last G20 meeting, the European countries looked upon India and China for help in dealing with the financial crisis. Thirty years ago this was unimaginable, but it now points to the inevitable.Born of trade
BRIC and BRICS
- The term Bric was first coined by Goldman Sachs economist Jim O'Neill, in a research paper entitled "The World needs better economic Brics"
- It describes the growing importance of the fastest growing emerging economies
- Bric stands for Brazil, Russia, India and China
- In December 2010, the four Bric nations invited South Africa to join their informal grouping, turning it into the Brics
Trade is the biggest glue that brings different cultures together. So, it was but natural for countries like China, India, Russia and Brazil to group.
Two of the BRICS countries - India and China - are big importers of energy and the other two - Russia and Brazil - are big exporters of resources.
Russia has huge oil and gas reserves and Brazil is rich in many minerals including iron ore.
So these importers of resources and exporters of resources have no option but to come together and fuel the growth process.Interdependence: India and China
India and China also share a unique interdependence, India being a big power in services and China in the manufacturing sector.
In the past 15 years, India's trade with the US and Japan has been almost stagnant, but that with China has almost doubled every four years and is expected to touch $100bn by 2013.
In the next five years India has to produce 1,000,000 megawatt of power, and 20% of all power equipment is being bought from China.
But how immune are the BRICS member countries to political tensions amongst each other?
Of course, there are tensions as the grouping is not something that has been planned by governments; it's a movement that market forces and globalisation have produced.'Co-opetition'
India and China are seen as two economies that are in great contest with each other in their region, but at the same time they are being forced to co-operate in various forums.
They have worked together on international platforms like the World Trade Organisation and on issues like climate change.
India and China face more or less similar socio-economic challenges, so they tend to come together while negotiating terms with the developed world.
This is why their relationship is often characterised by the term 'Co-opetition' - competition as well as co-operation.The US Dilemma
Surely, India and China will start dominating the global financial markets in the near future”
Driven by trade, many countries have been joining economic forces with India and China, but they are also dependent on the United States for security concerns. This is leading to a new kind of geopolitical reality across the world.
Much as the BRICS countries are building trade partnerships amongst themselves, they are also engaging with emerging Eastern economies like South Korea, Indonesia, Vietnam and even Japan.
But these smaller countries look towards the United States to lead a new security framework in the Indo-Pacific region.
For India too, its trade with China surpassed that with the United States two years ago, but in the context of civil nuclear co-operation and security issues in the Indian and Pacific Ocean, it is veering towards the US.
It is after all in this region that the most important trade routes for energy trading and import of various goods and services exist.From Wall Street to Asia
The BRICS countries have 40% of the world's population and almost 25% of the world's gross domestic product if measured on the basis of purchasing power.
Demographically, while populations in Europe and America will be ageing in the coming decades, these markets will have an ever-growing share of consumers.
Surely, India and China will start dominating the global financial markets in the near future. As a result the price discovery of commodities, oil, minerals and metals that currently happens on Wall Street will move to Asia. And that will be a very big change.
But to make that happen, India and China will have to become more open economies and need to introduce capital account convertibility to facilitate transaction of financial assets easily on market-determined rates.
They will also need to develop strong global financial institutions that can facilitate this shift in the world economy.