rest of the chapter is organized as follows. First, I look into select metrics of economic importance of BRICS economies. This is followed by a discussion of three aspects of macroeconomic policies, viz., monetary, fiscal, and exchange rate. The trade pattern of the BRICS block is discussed next. Before I conclude, the case and future of economic cooperation between these countries is explored.
Size of the BRICS Economies and Their Growth Trajectory
The first element of heterogeneity is perhaps reflected in the differing sizes of the BRICS countries. In 2017 in terms of GDP (at PPP), as against the US $23 trillion economy of China, India stood at US $9.5 trillion, and Brazil, Russia, and South Africa stood at US $3.2 trillion, US $4 trillion, and US $766 billion, respectively. Put differently, in 2017, the size of the Chinese economy was roughly 2.5 times of that of the Indian economy, while it was nearly 7 times and 6 times for Brazil and Russia, respectively, and for the South African economy it was 30 times! This is more effectively demonstrated in these countries’ share in global GDP at PPP (Figure 1(a)), where China clearly, as the biggest economy in the world (in terms of PPP), emerged much bigger vis-à-vis other partners. Moreover, as China has surpassed the US economy in terms of share in global GDP (at PPP), the share of BRICS has surpassed that of the G7 economies (Figure 1(b)). Thus, by 2016, BRICS emerged as the biggest economic power in terms of share in global GDP (at PPP).4
Figure 1:Share of the BRICS economies and G7 block in global GDP (at PPP).
Source: Calculated from World Economic Outlook Database, April 2018, IMF.
Of course, this does not mean that the extent of well-being across these economies is so different. Differing population size is the key to understand trends in per capita GDP. After all, in 2017 in terms of population, China (1.4 billion) and India (1.3 billion) were far above Brazil (207 million), Russia (144 million), and South Africa (57 million). Thus, effectively, the economic sizes of the BRICS countries are at variance with average well-being (Figure 2). Illustratively, in 2017, in terms of per capita GDP, Russia at nearly US $28,000 was way above Brazil (US $15,600) or China (US $16,660), while India’s per capita GDP at nearly US $7,000 was the lowest.
The growth performance of the BRICS countries also differed considerably. Notwithstanding recent deceleration, China grew at about 10% for nearly 25 years. Indian growth too has registered a steady acceleration since the initiation of its reform program in the early 1990s. After tumbling in the 1990s, Russian growth experienced a roller roaster movement in sync with petroleum prices. Brazil and South Africa too experienced lower growth rates in comparison with China and India (Table 1).
More importantly, the economic drivers varied grossly across these economies. While over the years China has become a global manufacturing hub, India’s growth has been driven primarily by domestic consumption and its vibrant services sector. Russian growth has been the outcome of its oil and gas opulence; in the case of Brazil and South Africa, commodities played major roles. The BRICS report of the Government of India has aptly noted,
Figure 2:Per capita GDP of the BRICS economies (US$).
Source: Calculated from World Economic Outlook Database, April 2018, IMF.
Table 1:Decadal growth rates of the BRICS economies (%).
Source: Calculated from World Economic Outlook Database, April 2018, IMF.
“Each of the BRICS countries has multiple and different attributes and thus each has a huge potential to develop. Brazil is extremely rich in resources such as coffee, soybeans, sugar cane, iron ore, and crude oil, with around 60 million hectares of arable land (just 7 per cent of its land area) but with an agricultural area of 31.2 per cent 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 … . It is a medium-sized country with a total land area of slightly more than 1.2 million sq. km and around 12 per cent arable land area. It is the world’s largest producer of platinum and chromium and holds the world’s largest known reserves of manganese, platinum group metals, chromium, vanadium, and alumino-silicates” (Government of India, 2012: 3).
But do these differences in economic size, population, and growth drivers get reflected in their macroeconomic policies?
Macroeconomic Policies in BRICS
We discuss the macroeconomic policies under the three broad heads of monetary policy, exchange rate regime, and fiscal policy.
Monetary Policies
At the current juncture, out of the five BRICS countries, three economies (viz., Brazil, India, and South Africa) have adopted inflation targeting as the framework of the monetary policy. This is in sync with the global fashion of adoption of inflation targeting in order to rein in inflation and fiscal profligacy as well as to assert a certain degree of independence of central banks. While for the most part, the Bank of Russia has had several goals for its policy, there was a gradual shift toward full-fledged inflation targeting since early 2015, abandoning the exchange rate targets in November 2014 (Korhonen and Nuutilainen, 2017). China is perhaps the only country in the block which continues to adopt a multiple indicator approach but an implicit exchange rate targeting (Table 2).
In the context of monetary policy, a discussion on inflation is in order. There are several difficulties in comparing inflation rates across the BRICS countries. First, inflation numbers for the Russian Federation are not available till 1993. Second, both Brazil and Russia had experienced astronomical inflation rates during the 1990s. Illustratively, during 1990–1995 Brazilian inflation rate was 1,400%, and it started tapering off since the mid-1990s; similarly, inflation for Russia during the 1990s was more than 200%. In fact, Brazil had yearly inflation rates well above 1,000% from 1989 (except 1991) until the Real Plan stabilized inflationary momentum (Garcia et al., 2019).5 While such a hyperinflationary trend in Brazil was reflective of unbridled monetary expansion, in the case of Russia, removal of long-maintained price controls and dismantling of the erstwhile socialist regime seemed to have played major roles. Figure 3 plots inflation rates for India, China, and South Africa since 1991 and for Russia and Brazil since 2000. It appears that at least in the recent past inflation did not turn out to be a major problem in these countries.
Table 2:Monetary policy framework in BRICS countries.
Source: Khundrakpam (2012) and respective central banks’ websites.
Figure 3:Consumer price inflation in the BRICS economies
