BRICS Countries: Economic Performance And Role In World Economy

Introduction to BRICS

Discuss about the Democratic BRICS as Role Models.

BRICS is the acronym of five countries that are Brazil, Russia, India, China and South Africa, which are expanding their economy rapidly. Each country has influenced their regional affairs significantly and all of them are members of G20 (Cooper & Farooq, 2017). South Africa is the last country, which is added in this group in 2011. Headquarter of BRICS is in Shanghai, China (Armijo & Roberts, 2014). According to economists, those countries are going to dominate the world economy by 2050. In 2015, those countries have possessed more than 3.1 billion people, which is almost 41% of total population of the world. Moreover, those countries together are going to capture 23.2% of the world’s total national income in 2018 (Rodionova, Chernyaev & Korenevskaya, 2017). The chief difference between BRICS and the European Union is that, countries of BRICS do not have political alliance or formal trading association within them like the second one. Those countries, especially China and India are economically potential to form a strong economic bloc. To maintain their cooperation, each country attends summit on the regular basis. The main motive of BRICS is to develop their countries together through providing financial support and assisting various infrastructure and projects and so on. For this reason, countries of BRICS have established New Development bank (NDB), which is also known as BRICS Development Bank and based on agreement (Cooper & Farooq, 2015). This bank is going to support private and public projects through providing loans, equity participation and guarantees.

The chief characteristic of each BRICS country is its developing economic performance, which can be derived by their respective growth rate of gross domestic product (GDP). Hence, it is essential to describe economic condition of those countries precisely.

Based on nominal gross domestic product, the economy of Brazil has ranked as eighth all over the world. The mixed economic structure of this country has focused on import substitution for obtaining economic growth. Within 2000 and 2012, Brazil has expanded its economy rapidly and consequently has surpassed the United Kingdom (Kamali et al., 2017). As a result, this country has become sixth largest country worldwide, based on its economy in 2012. However, Brazil has also experienced recession period since 2014, though after 2017, this specified country has recovered its economic condition again. The economic progress of Brazil between 2003 and 2014 has helped 29 million people to lift out of poverty and consequently, income inequality among people has also decreased gradually (Aytaç, 2018).

Economic Performance of BRICS Countries

Russia has possessed a mixed economy with upper-middle income along with state ownership for some strategic areas. In 1990s, the country has privatised most of its agricultural and industrial sectors along with defence and energy-related sectors. The country has possessed almost 30% of the natural resources all over the world (Bykova & Lopez-Iturriaga, 2018). Its economic growth chiefly depends on energy revenues obtained from oil, precious metals and natural gas and consequently, the country exports those products by large amount.  As a result, Russia is considered as “energy superpower”. The economy of Russia has remained sixth largest economy based on its PPP worldwide while based on exchange rates, it has ranked twelfth in 2016. The standard of living of this country has increased significantly between 2000 and 2012 through exporting energy products. This in turn has led the disposable income of this to increase by 160% (Sesay, Yulin & Wang, 2018). However, this country’s economy has going to recession in 2014 due to decreasing prices of oil gases in international market along with following capital flight. However, after 2017, this country has started to recover its economic condition through increasing its GDP by 1.5% (tradingeconomics.com, 2018). According to the Global Economic Prospects 2018, with significant recover in oil prices along with macro stabilization and developed consumer and business confidence, the country is expecting to grow further by 1.7% to 1.8% within 2018 and 2020.

India has possessed a developing and mixed economy. Based on nominal GDP, the country has possessed sixth largest economy. According to the per capita nominal GDP, the country ranks 141 in 2018.  After economic liberalisation in 1991, India’s GDP has increased annually by 6% to 7% in almost every year (Khan, Yadav & Mathew, 2017). Moreover, within financial year 2015 and 2018, the country’s economy has become the fastest growing country all over the world. The chief factors behind rapid expansion of India’s economy are young workforce, higher amount of savings and investment along with decreasing dependency ratio and increasing integration in world economy. This specific country has possessed world’s rapidly expanding service sectors, which has contributed 57% to the country’s total GDP in 2012-13 (tradingeconomics.com, 2018). In this context, it can be mentioned that India has become one of the major exporters of business process outsourcing (BPO), IT services and software services and consequently has earned $154 billion revenue in 2017 (Upadhyayula, Dhandapani & Karna, 2017). Moreover, between 2014 and 2015, this country has possessed more than 3000 technology start-hubs and consequently has become third-largest start-up hub worldwide. India’s economy is chiefly based on agricultural sector as it has contributed largest portion to the country’s GDP.

Brazil's Economy

Based on nominal GDP, China has possessed the second largest economy, while based on purchasing power parity it has become the largest economy all over the world. Until 2015, the economy of China has remained the fastest-growing one, with 10% average growth rates over 30 years. Political and historical facts have played important role for developing its economic condition and consequently, the public sector has contribute significant portion compare to the private one, to China’s national income. In 2016, China has ranked 71 according to the nominal GDP on per capita income basis (Yang & Zhang, 2018). This specified country is the largest manufacturing economy of the world and exports goods by large amount as well. In addition to this, China is considered as the fastest growing consumer market in world and second-largest importer of goods. Consequently, this country has become the largest trader worldwide and has also played significant role in international trade. Thus, China has increased its engagement with trading organisations in recent years along with some treaties.

According to figure 4, China’s GDP has decreased gradually after 2014. This happens due to economic slowdown of this country as public sector has experienced structural changes due to debt burden.

South Africa, which is the last country added in BRICS in 2011, has the third largest economy after Nigeria and Egypt. According to the World Bank, this industrialised country has possessed an upper-middle-income economy. This country has a comparative advantage for producing mining, agriculture and manufacturing products (Numbi & Malinga, 2017). However, the economic structure of this country is diversified with some key economic sectors, which have primary sector along with secondary sectors including clothing, textiles, energy, and telecommunication and so on.

The chief economist of Goldman Sachs, Jim O’Neill has coined this acronym “BRIC” consisting Brazil, Russia, India and China with largest economies along with expanding markets. The chief reason for making this group with those countries has come from the expectations that each country can emerge its economy at a faster rate compare to some developed countries like the U.S.A, the U.K and Russia and consequently they can play important role in the world economy (Bourne, 2015). In this context, it can be mentioned that Brazil, Russia and India have already surpassed the smallest G7 economy, based on the nominal GDP for the last 17 years while China has left behind Japan and consequently has become the second largest economy. Moreover, nominal GDP of BRIC is similar with the US or EU and can overtake very soon (Öni? & Gençer, 2018). Jim O’Neil has pointed out some reasons for establishing this group, while the chief reason has occurred after the world financial crisis, the world has experienced an imbalance, and western countries have played major roles to control financial institution after this crisis.

Russia's Economy

After discussing economic performance of each country under BRICS, the chief reason for including them within this group can be analysed. Every country of BRICS has developed their economic condition through capturing significant market share in world economy. As a result, they have possessed enough potential to defeat some economically strong developed countries like the U.S.A by 2050 and this is the chief reason behind including those countries within the group of BRICS (Ivanova, Saratovsky & Latyshov, 2018). Consequently, five countries may jointly form the largest entity in international market due to their fastest growing and expanding markets. In this context, it can be mentioned that, each member country of BRICS have enough opportunity to develop their economic condition further through using their unused resources, increasing populations and expanding infrastructure (Armijo & Roberts,2014). Moreover, the role of China and India can be described with special emphasis, where these two countries have possessed significant share in global economy while these share can increase further in coming years. Thus, those countries have formed BRICS for helping each other regarding various economical issues.

The above figure has represented share of Brazil in global gross domestic product, based on purchasing power parity (PPP) from 2012 to 2022. In 2017, the country has contributed 2.55% to the world’s total income (statista.com, 2018). Based on this, it can be predicted that this trend is going to fall in coming years though this rate is low.

In figure 7, Russia’s share in global GDP adjusted for PPP, has decreased over the year, since 2012. In 2017, the estimated share of this country on global GDP has remained at 3.16%. Hence, by following this trend, it can be predicted that the trend is going to decrease further and may become 2.84% in 2022 (statista.com, 2018).

Moreover, South Africa has also increased its economics condition and with financial support, the country can increase its market in world economy, as it has enough potential to do this. In this context, it can be mentioned that those decreasing trend of each country’s share in global GDP for coming years has shown based on the trend of previous years where economical crisis has played significant role. However, in future, this share may increase further if Brazil and Russia develop their economic performance again.

According to figure 8, it can be said that the country’s share of the global GDP has remained 6.23% in 2012 while in 2017 this percentage of share has remained 7.46% (statista.com, 2018). According to this trend, India is going to contribute more amounts to the world’s total national income in coming years. Hence, this trend has showed that the economic condition of this specified country is expanding rapidly and significantly in world economy.

India's Economy

China’s share to the global GDP has also increased significantly since 2010. This country has largest share of global GDP compare to other countries of the BRICS. Moreover, based on this trend, it can be predicted that this share of global GDP may increase further and in 2021, this share may become 19.76% (statista.com, 2018). Hence, among all other countries of BRICS, China has obtained the leading position.

However, in this context, it can be mentioned that future of BRICS is uncertain because those member countries are facing some economical as well as political disturbances. For instance, China has captured significant market share in some developed countries though its own economic condition has experienced some downfall recently. Other countries, for instance, South Africa, Russia and Brazil have also possessed some issues like corruption that have forced economic condition to decrease further. However, with proper policies and rules, BRICS can capture the world market very soon.

Conclusion:

After the entire discussion, this report can conclude this briefly. BRICS consists with Brazil, Russia, India, China and South Africa and each of them is considered as developing countries. Those countries have enough economic resource and potentiality to capture the world market, which in turn can help them to earn economical and political power to influence other developed and developing countries. China and India, with their updated process and developing infrastructure and economy, have captured significant position. In addition to this, development of BRICS bank has helped them to develop their further by providing financial assistance.

References:

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China's Economy

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