https://sputnikglobe.com/20220625/new-development-banks-success-in-west-depends-on-brics-risk-taking-ability-on-governance-economist-1096649932.html
New Development Bank’s Success in West Depends on BRICS Risk-Taking Ability on Governance: Economist
New Development Bank’s Success in West Depends on BRICS Risk-Taking Ability on Governance: Economist
Sputnik International
Since its inception in 2010, BRICS, a five developing nations grouping, defied all the predictions that it would crumble or become insignificant due to group... 25.06.2022, Sputnik International
2022-06-25T11:18+0000
2022-06-25T11:18+0000
2022-10-19T20:02+0000
china
russia
new development bank (ndb)
g7
developed countries
west
us
narendra modi
vladimir putin
trade
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Sputnik spoke with Sudhanshu Kumar, an economist at the Centre for Economic Policy and Public Finance ̶ an organization which provides input to governments regarding policy formulation and implementation ̶ about the outcome of the 14th BRICS Summit and the disrupted global economy.Sputnik: BRICS leaders have agreed to expand the New Development Bank (NDB) to other regions, including the developed world, to enhance its influence. What is the scope for the NDB in the developed world, and how will it impact its governance?Sudhanshu Kumar: The NDB has successfully financed multiple development projects for member countries over the years. The expansion of the NDB has also been under discussion for the last few years. The initial idea was to expand it to the neighboring countries of core members. As far as the developed world is concerned, the success will depend on whether BRICS allows them to be a significant shareholder. In that case, the characteristics and governance of the NDB would change from it being a BRICS-led development bank. However, there is no such challenge in expanding it to developing countries [which] need capital to support their development projects.Sputnik: Indian PM Narendra Modi steered clear of any specific references to western sanctions and spoke about "governance of the global economy" in the context of pandemics. However, leaders stressed that members have a very similar view of the governance of the global economy. How do you assess India's position vis-a-vis BRICS members? Sudhanshu Kumar: All the countries in the world have been affected by the pandemic, which has severely affected the global supply chain. In this context, the idea of 'governance of global economy' is nothing but stressing the benefits of globalization with fewer restrictions. No country openly denies the concept of promoting international cooperation for overall gain. However, at present, the international institutional capacity to resolve various challenges to economic growth is absent. Existing global organizations have limited success on this front. The idea of 'global governance of economy' should be seen as moving towards a world without trade restrictions, [where] conflicts are resolved through mutual discussion. But then the practical experiences suggest that individual interests of the countries are prioritized more than the overall gain of globalization. Regarding the interest of BRICS countries as a group, it is important to note that India has been instrumental, along with the other member countries, in the creation of BRICS. One of the major successes of the BRICS is the creation of the NDB. At the same time, we must realize that India is a member of another group of countries for strategic reasons, and so are the other member countries. The economic interests of the BRICS member countries are not common as it is guided by the strategic relations.Sputnik: Addressing the BRICS business forum, Russian President Vladimir Putin said that members are exploring the possibility of creating an international reserve currency based on the basket of BRICS currencies. What could be the positives of this proposal? Sudhanshu Kumar: The demand for an international reserve currency as an alternative to the US dollar has been around for the last many years. The countries have been exploring the use of currencies other than the US dollar for trade. The success of a reserve currency based on the basket of a small group of countries depends on the economic strength of the countries of the group and more than that, better friendly and cooperative relations among the group countries are crucial. The recent experience of the limited success of the euro as an alternative to the US dollar for trade between countries at the global level, despite it being a currency for a group of countries, highlights many complexities of developing a new reserve currency. The positive of such a proposal is that it puts forward the idea of the need for an international reserve currency that does not favor a particular country's interest. Sputnik: Despite unprecedented border tensions, India and China have registered record trade volumes. Does this indicate that the two countries can also accommodate new economic initiatives within BRICS despite some negatives for any individual country?Sudhanshu Kumar: The benefits of globalization make trade a natural process for the countries despite some level of strain in strategic relations. The countries across the world are so interconnected that it is difficult for them to ignore the benefits of trade. However, the relations between the two countries have an impact on the scale of economic engagement. The trade between China and India has the potential to be much more than the current level. Currently, the trade between the two countries is, even though it has increased, at a lower level compared to the level that will benefit both countries. The natural process of increased economic engagement would be possible with the improvement in the strategic relationship between the two countries. The success of any economic initiative within BRICS depends on the relationship between India and China.Sputnik: Energy flows to Asian countries from Russia since February are such that even the West would not have anticipated. How do you see this trend, and what could be the stimulating factors that may push this trend to gain momentum? Sudhanshu Kumar: Countries across the world are facing the tremendous challenge of price rises due to disruptions in the supply chain. These price rises come in addition to the expected increase in prices due to the attempts to increase demand through the various fiscal stimulus packages by the governments to face the challenges of the pandemic.Countries are facing difficulties with food and energy supplies. Therefore, the increased energy flow from Russia might be a surprise for the West, but it is natural for the countries that put its interest before the preferences of the West. The cost of energy inputs is the key driver of the energy flow rather than the international relations. Therefore, the countries that supply with favorable terms will continue to benefit. The unilateral sanctions by a selected group of countries are not going to be effective in the long run.Sputnik: It seems China is in favor of expanding BRICS. How will this benefit BRICS in terms of its economic power?Sudhanshu Kumar: Like any other group of countries, BRICS provides a platform for the member countries to engage in mutually beneficial activities. However, a larger group makes it easy for strong economies to advance initiatives of their interest further. China expects to benefit from engaging a larger set of countries through an effective platform. At the same time, the current members are not associated with the BRICS only. Their economic and strategic benefits are certainly in being part of the other groups also.In the end, it is the trust among the countries that define the future path of the group like BRICS. For the success of initiatives like BRICS, China and India need to build better bilateral relations.Sputnik: UK PM Johnson said there is a risk of Ukraine fatigue worldwide. He mentioned that inflation is experienced by so many countries putting pressure on people's staying power. Can this lead to the gradual de-sanctioning of Russia? How do you assess these remarks? Sudhanshu Kumar: As we mentioned earlier, globalization is a natural process, and disrupting it through sanctions on major suppliers of input and raw materials unilaterally is not going to work in the long run. The remarks should be seen as the realization of the same. It is impossible to ignore countries with natural resources like Russia through sanctions. The cost is huge and no big economy is ready to afford that. It is for the benefit of all the countries to engage and build better relations that help economic activities.Sputnik: Many believe that the West favors de-coupling as they think developing countries capitalize on globalization more than the global north. How can BRICS stop this attempt at de-globalization? Sudhanshu Kumar: This assessment is based on observations about developed economies' strategic use of tactics to benefit from trade. The chronology of the push for globalization indicates that developed countries entered trade agreements for their benefits which is not very unusual when economies expand. However, over the years, it has been established that countries do benefit from free trade if it is 'free' from restrictions by a selected group of developed countries. BRICS provides a platform to engage and push for the benefits of the collective interest of member countries at the world level.Sputnik: Commodity prices remain a significant concern for developing countries. Can BRICS bring a platform to trade in commodities without fear of sanctions? Sudhanshu Kumar: BRICS members have the potential to engage in trade, ignoring the sanctions. However, it is easier said than done. The conflicting relations between the two key member countries, China and India, pose a major challenge to the success of any initiative through BRICS. However, the trade that favors the common interest of the two countries would continue to grow.
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New Development Bank’s Success in West Depends on BRICS Risk-Taking Ability on Governance: Economist
11:18 GMT 25.06.2022 (Updated: 20:02 GMT 19.10.2022) Since its inception in 2010, BRICS, a five developing nations grouping, defied all the predictions that it would crumble or become insignificant due to group contradiction over several issues. All the leaders vowed to further enhance the group's influence on the global stage during the China-hosted 14th annual Summit.
Sputnik spoke with Sudhanshu Kumar, an economist at the Centre for Economic Policy and Public Finance ̶ an organization which provides input to governments regarding policy formulation and implementation ̶ about the outcome of the 14th BRICS Summit and the disrupted global economy.
Sputnik: BRICS leaders have agreed to expand the New Development Bank (NDB) to other regions, including the developed world, to enhance its influence. What is the scope for the NDB in the developed world, and how will it impact its governance?
Sudhanshu Kumar: The NDB has successfully financed multiple development projects for member countries over the years. The expansion of the NDB has also been under discussion for the last few years.
The initial idea was to expand it to the neighboring countries of core members. As far as the developed world is concerned, the success will depend on whether BRICS allows them to be a significant shareholder. In that case, the characteristics and governance of the NDB would change from it being a BRICS-led development bank.
However, there is no such challenge in expanding it to developing countries [which] need capital to support their development projects.
Sputnik: Indian PM Narendra Modi steered clear of any specific references to western sanctions and spoke about "governance of the global economy" in the context of pandemics. However, leaders stressed that members have a very similar view of the governance of the global economy. How do you assess India's position vis-a-vis BRICS members?
Sudhanshu Kumar: All the countries in the world have been affected by the pandemic, which has severely affected the global supply chain. In this context, the idea of 'governance of global economy' is nothing but stressing the benefits of globalization with fewer restrictions.
No country openly denies the concept of promoting international cooperation for overall gain.
However, at present, the international institutional capacity to resolve various challenges to economic growth is absent. Existing global organizations have limited success on this front. The idea of 'global governance of economy' should be seen as moving towards a world without trade restrictions, [where] conflicts are resolved through mutual discussion. But then the practical experiences suggest that individual interests of the countries are prioritized more than the overall gain of globalization.
Regarding the interest of BRICS countries as a group, it is important to note that India has been instrumental, along with the other member countries, in the creation of BRICS. One of the major successes of the BRICS is the creation of the NDB. At the same time, we must realize that India is a member of another group of countries for strategic reasons, and so are the other member countries. The economic interests of the BRICS member countries are not common as it is guided by the strategic relations.
Sputnik: Addressing the BRICS business forum, Russian President Vladimir Putin said that members are exploring the possibility of creating an international reserve currency based on the basket of BRICS currencies. What could be the positives of this proposal?
Sudhanshu Kumar: The demand for an international reserve currency as an alternative to the US dollar has been around for the last many years. The countries have been exploring the use of currencies other than the US dollar for trade.
The success of a reserve currency based on the basket of a small group of countries depends on the economic strength of the countries of the group and more than that, better friendly and cooperative relations among the group countries are crucial. The recent experience of the limited success of the euro as an alternative to the US dollar for trade between countries at the global level, despite it being a currency for a group of countries, highlights many complexities of developing a new reserve currency.
The positive of such a proposal is that it puts forward the idea of the need for an international reserve currency that does not favor a particular country's interest.
Sputnik: Despite unprecedented border tensions, India and China have registered record trade volumes. Does this indicate that the two countries can also accommodate new economic initiatives within BRICS despite some negatives for any individual country?
Sudhanshu Kumar: The benefits of globalization make trade a natural process for the countries despite some level of strain in strategic relations. The countries across the world are so interconnected that it is difficult for them to ignore the benefits of trade.
However, the relations between the two countries have an impact on the scale of economic engagement. The trade between China and India has the potential to be much more than the current level.
Currently, the trade between the two countries is, even though it has increased, at a lower level compared to the level that will benefit both countries.
The natural process of increased economic engagement would be possible with the improvement in the strategic relationship between the two countries. The success of any economic initiative within BRICS depends on the relationship between India and China.
Sputnik: Energy flows to Asian countries from Russia since February are such that even the West would not have anticipated. How do you see this trend, and what could be the stimulating factors that may push this trend to gain momentum?
Sudhanshu Kumar: Countries across the world are facing the tremendous challenge of price rises due to disruptions in the supply chain. These price rises come in addition to the expected increase in prices due to the attempts to increase demand through the various fiscal stimulus packages by the governments to face the challenges of the pandemic.
Countries are facing difficulties with food and energy supplies. Therefore, the increased energy flow from Russia might be a surprise for the West, but it is natural for the countries that put its interest before the preferences of the West.
The cost of energy inputs is the key driver of the energy flow rather than the international relations. Therefore, the countries that supply with favorable terms will continue to benefit. The unilateral sanctions by a selected group of countries are not going to be effective in the long run.
Sputnik: It seems China is in favor of expanding BRICS. How will this benefit BRICS in terms of its economic power?
Sudhanshu Kumar: Like any other group of countries, BRICS provides a platform for the member countries to engage in mutually beneficial activities.
However, a larger group makes it easy for strong economies to advance initiatives of their interest further. China expects to benefit from engaging a larger set of countries through an effective platform. At the same time, the current members are not associated with the BRICS only. Their economic and strategic benefits are certainly in being part of the other groups also.
In the end, it is the trust among the countries that define the future path of the group like BRICS. For the success of initiatives like BRICS, China and India need to build better bilateral relations.
Sputnik: UK PM Johnson said there is a risk of Ukraine fatigue worldwide. He mentioned that inflation is experienced by so many countries putting pressure on people's staying power. Can this lead to the gradual de-sanctioning of Russia? How do you assess these remarks?
Sudhanshu Kumar: As we mentioned earlier, globalization is a natural process, and disrupting it through sanctions on major suppliers of input and raw materials unilaterally is not going to work in the long run. The remarks should be seen as the realization of the same.
It is impossible to ignore countries with natural resources like Russia through sanctions. The cost is huge and no big economy is ready to afford that. It is for the benefit of all the countries to engage and build better relations that help economic activities.
Sputnik: Many believe that the West favors de-coupling as they think developing countries capitalize on globalization more than the global north. How can BRICS stop this attempt at de-globalization?
Sudhanshu Kumar: This assessment is based on observations about developed economies' strategic use of tactics to benefit from trade. The chronology of the push for globalization indicates that developed countries entered trade agreements for their benefits which is not very unusual when economies expand.
However, over the years, it has been established that countries do benefit from free trade if it is 'free' from restrictions by a selected group of developed countries.
BRICS provides a platform to engage and push for the benefits of the collective interest of member countries at the world level.
Sputnik: Commodity prices remain a significant concern for developing countries. Can BRICS bring a platform to trade in commodities without fear of sanctions?
Sudhanshu Kumar: BRICS members have the potential to engage in trade, ignoring the sanctions. However, it is easier said than done. The conflicting relations between the two key member countries, China and India, pose a major challenge to the success of any initiative through BRICS. However, the trade that favors the common interest of the two countries would continue to grow.
