India seeks $500-bn BRICS trade by 2020

While a key agreement on setting up a BRICS credit rating agency eluded them, leaders of the five emerging large economies ended their eighth summit with a commitment to strive for greater synergy and higher economic growth. With Indian and Chinese exports to the West shrinking, Prime Minister Narendra Modi called for doubling of intra-BRICS trade to $500 billion by 2020. This was seen as a

key to spur growth in BRICS economies, two of which have recorded negative growth. Chinese President Xi Jinping drew attention to “some countries getting more inward looking in their policies… Protectionism is rising and the forces against globalisation are an emerging risk,” he said.

The ‘Goa Declaration’, issued at the end of the summit, welcomed “experts exploring the possibility of setting up an independent BRICS Rating Agency based on market-oriented principles, in order to further strengthen the global governance architecture. However, it was felt that experts should study the proposal further since credit rating agencies need to have credibility,” said Amar Sinha, secretary (economic relations), external affairs ministry.

An important idea that nearly reached fruition was the suggestion that BRICS members should trade in their local currencies. If this happens, trading costs could come down by up to six per cent, according to estimates.

Member countries also called for greater cooperation on issues of tax evasion, unaccounted or ‘black money’. The member countries affirmed “that profit should be taxed in the jurisdiction where the economic activity is performed and the value is created.”     

It said BRICS countries supported the Common Reporting Standard for Automatic Exchange of Tax Information (AEOI). “We support the implementation of the Base Erosion and Profit Shifting Project (BEPS) with due regard to the national realities of the countries,” the declaration said. It noted that aggressive tax planning and tax practices hurt equitable development and economic growth and that “Base Erosion and Profit Shifting must be effectively tackled.”

In the context of India, the declaration also recognised “that nuclear energy will play a significant role for some of the BRICS countries.” The declaration stated that the member countries underlined the “importance of predictability in accessing technology and finance for expansion of civil nuclear energy capacity which would contribute to the sustainable development of BRICS countries.”

The Chinese President called upon other members to ensure the success of the New Development Bank (NDB), and also open it to the “BRICS circle of friends”. Later, speaking at the BIMSTEC Outreach Summit, Modi said the BRICS Bank could in future lend to BIMSTEC members countries as well. The declaration said “BRICS institution building is critical” for the shared vision of member countries of “transforming the global financial architecture to one based on the principles of fairness and equity.” There was enough evidence that BRICS countries were committed to supporting the NDB. Briefing BRICS leaders, NDB president KV Kamath said the bank aimed at lending $2.5 billion next year and was encouraging local currency financing to minimise currency risks. He said the bank would expand from 60-member staff to 350 by the end of its third year.

However, the BRICS members called “for the advanced European economies to meet their commitment to cede two chairs on the Executive Board of the IMF.” The declaration further said: “The reform of the IMF should strengthen the voice and representation of the poorest members of the IMF, including Sub-Saharan Africa.”

The member states inked three agreements — to set up a BRICS Agricultural Research Platform; strengthening interaction among customs administrations of member countries; and between the BRICS countries National Development Banks and the New Development Bank, popularly known as BRICS Bank, to strengthen the BRICS Inter-bank Cooperation Mechanism to help increase intra-BRICS trade, investments and business.

Another initiative at this year’s summit was to institute annual BRICS Economic Research Award to promote advanced research in economics of relevance to BRICS countries. “It’s aimed at creating a body of work of indigenous economic thinking with relevance to BRICS,” Sinha said.

The declaration termed the operationalisation of the New Development Bank (NDB) and the BRICS Contingent Reserve Arrangements (CRA) has strengthened the global financial safety net. The declaration noted that global economic recovery is progressing but is weaker than expected with downside risks continuing to persist.

“This gets reflected in a variety of challenges including commodity price volatility, weak trade, high private and public indebtedness, inequality and lack of inclusiveness of economic growth,” the declaration said. It noted that the “outcome of UK referendum have further added to the uncertainty in the global economy.”

The BRICS countries said they were determined to use all policy tools — monetary, fiscal, and structural, individually and collectively, to achieve the goal of strong, sustainable, balanced and inclusive growth. “We also take note that the spill-over effects of certain policy measures in some systemically important advanced economies can have adverse impact on growth prospects of emerging economies,” it said. The leaders called for the need to use tax policy and public expenditure in a more growth-friendly way.

They said that they shared concerns regarding the challenges of sovereign debt restructurings, and noted that timely and successful debt restructuring is key for ensuring access to international capital markets, and hence economic growth, for countries with high debt levels.

The declaration also noted the deliberations on a BRICS Railways Research Network aimed at promoting research and development in the sector.