Executive Summary

In the recent years, developing countries have increasingly emerged as regional and global growth engines, reflecting higher growth in economic activity and trade, as compared to the developed economies. Brazil, Russia, India, China and South Africa (BRICS) – the five emerging global powers from the continents of Asia, Africa and Latin America – are incrementally increasing their global engagements. Today, BRICS economies together account for 22.5 per cent of the global output, 17.2 per cent of global trade, and over 40 per cent of the global population.

Earlier called BRIC, without South Africa, this group was initially coined by Goldman Sachs in 2001, by Jim O’Neill in a paper titled ‘Building Better Global Economic BRICs’. This paper concluded that over 10 years the weight of the BRIC countries and especially China in world GDP will grow, raising important issues about the global economic impact of fiscal and monetary policy in the BRIC countries. In 2003, their report, “Dreaming with BRICs: The Path to 2050” stated that by 2050 these economies together would be larger in US Dollar terms than the G-6 (‘Group of Six’), consisting of the United States, Germany, Japan, the United Kingdom, France and Italy.

BRICS had a tentative start in the margins of the 61^st session of the UN General Assembly in New York in September 2006. The foreign ministers of four countries, Brazil, Russia, India and China, met briefly to explore ways to cooperate politically. The proposal to hold regular meetings came when the leaders of Russia, India and China met at the margins of G-8 Outreach Summit in St. Petersburg in July 2006 (Group of Eight consists of France, Germany, Italy, the United Kingdom, Japan, the United States, Canada, and Russia).

This grouping of vastly different economies took a concrete shape when the leaders of the BRIC nations (Brazil, Russia, India, and China) agreed to hold regular summits starting in 2009 to discuss broad range of issues. South Africa was added to the list on April 13, 2011 creating “BRICS” (Brazil, Russia, India, China and South Africa). Nonetheless, BRICS remains largely heterogeneous in character, with wide variance in the socio-political-legal frameworks of member countries.

By the year 2020, nominal GDP of BRICS economies is projected to touch US$ 23 trillion and its share in world GDP is expected to increase to 25.2 per cent. Growth in BRICS economies is also expected to stabilize by 2020, with India and China being the major drivers of the region’s growth.

BRICS Global Trade

The significance of international trade among BRICS countries was highlighted during the Sixth BRICS Summit in Fortaleza, Brazil in 2014. During this Summit the BRICS countries adopted a key decision on launching comprehensive talks regarding the BRICS Strategy for Economic Partnership and a draft BRICS Roadmap for BRICS Trade, Economic and Investment Cooperation.

The total trade of BRICS has almost doubled from US$ 2.8 trillion in 2006 to US$ 5.7 trillion in 2015. This upward trend has been underlined by favorable growth performances of both its exports and imports. In the case of exports, total exports of BRICS has risen from US$ 1.6 trillion in 2006 to US$ 3.2 trillion in 2015, with a resultant rise in the share of BRICS in global exports from 13.2 per cent to 19.3 per cent during the period. As regards imports, total imports of BRICS have also witnessed a continuous growth. In 2015, total imports rose to US$ 2.5 trillion (15.1 per cent of global imports), up from US$ 1.3 trillion (10.3 per cent of global imports) in 2006.

BRICS together maintain a trade surplus, which has increased from US$ 314.8 billion in 2006 to US$ 644.7 billion in 2015. China, Russia and Brazil, maintained a trade surplus, while India and South Africa maintained a trade deficit in the same year.

Electrical machinery and equipment dominated the exports of BRICS, accounting for 19.6 per cent of its global exports in 2015. Other commodities in its export basket include machinery and equipment; mineral fuels, oils and its distillation products; furniture, bedding, mattresses, and cushions; and vehicles other than railway or tramway. Exports of furniture, bedding, mattresses, and cushions registered the highest growth with a CAGR of 14.4 per cent during 2006 and 2015.

Imports of BRICS were also dominated by electrical machinery and equipment, accounting for 20.7 per cent of its global imports in 2015. While BRICS’ export of electrical machinery and equipment mainly included telephone sets (HS 8517), imports of the BRICS economies was dominated by electronic integrated circuits (HS 8542). Other items in the import basket of BRICS include mineral fuels, oils and its distillation products; machinery and equipment; optical, photographic, medical or surgical apparatus; and vehicles other than railway or tramway.

Intra-BRICS Trade

BRICS countries have made significant progress in integrating with the global economy. Analysis of trading patterns within BRICS countries reveals that levels of intra-BRICS trade are quite diverse, mainly reflecting comparative sizes of the economies. Over the past decade, intra-BRICS trade has increased by nearly threefold, supported by increase in intra-regional trade for all the member countries.

An analysis of the intra-BRICS trade reveals that China has played a significant role by accounting for nearly half of the intra-BRICS trade. This was followed by India, Brazil, Russia, and South Africa.

However, it may be mentioned that BRICS countries have not harnessed the potential offered by the regional cooperation, especially given the significant growth of its market size to US$ 16.5 trillion in 2015 from US$ 6.1 trillion a decade ago, supported by a large consumer base of over 3 trillion population.

An analysis of trade intensity index (TII) highlights that trade intensities of Brazil and South Africa with BRICS have improved since 2001, while that of China, India and Russia, on the other hand, have deteriorated since 2001.

The mutually invigorating trade interactions among the BRICS countries is reflected in their trade composition. Brazil and Russia are among the world’s largest producers and exporters of natural resource, while most of their imports include manufactured and processed goods. India and China, on the other hand, are among the major exporters of manufactured and processed goods, and major importers of natural resources. South Africa, apart from being a major trading partner for India, China and Brazil, serves as an important trade route for India-Brazil trade. Thus, growing synergies among the BRICS economies is mutually beneficial to the members. According to Goldman Sachs, a significant driver of BRICS growth stems from the large scale Chinese and Indian industrialisation and urbanisation creating strong demand for Russia’s and Brazil’s abundance of natural resources.

Potential for Enhancing India’s Trade with BRICS

Underlying the robust trend in bilateral trade between India and rest of BRICS countries, has been the rising trend in India’s trade deficit with BRICS countries. India’s trade deficit with rest of BRICS increased from US$ 8.7 billion in 2006, to US$ 58.4 billion in 2015. India maintained the largest trade deficit with China (US$ 52 billion), followed by Russia (US$ 2.9 billion), South Africa (US$ 2.5 billion), and Brazil (US$ 1 billion).

To further enhance India’s trade with the BRICS countries, and at the same time to address the rising trade deficit, an important strategy would be to focus on India’s export potential to these countries. Such a strategy would also contribute to the overall efforts to enhance India’s trade with BRICS.

While India’s current global capability could be matched with the import demand of BRICS countries, leading to enhanced exports from India, strategy to promote bilateral trade relations could also encompass the case for enhancing domestic production in India to cater to the large demand existing in other BRICS countries.

Given India’s expertise in several manufactured products, and technology which is affordable and adaptable, other BRICS countries would also stand to gain with increased import of such items from India. This would also help in further strengthening bilateral ties, and resulting in a mutually rewarding long-term partnership. Potential items of export for India to other BRICS countries up to the 6-digit HS code, have been identified and presented in the study.

Challenges and the Way Forward

BRICS countries have made significant progress in integrating with the global economy. According to the IMF, more than 40 per cent of the global economic growth is generated by BRICS economies. However, the share of intra-BRICS trade to its global trade is still as low. Further, intra-BRICS trade is dominated by China on both export and import fronts. The growth of intra-BRICS trade has been constrained primarily by high and escalating trade costs and restrictive trade policy environment.

In the World Bank’s ‘Ease of Doing Business’, trading across borders index, it has been observed that despite progress made in the past, the trading across borders rankings of BRICS countries remain low. Cumbersome documentation and customs clearance, poor inland transportation and terminal handling, are some of the reasons that hamper exports.

BRICS economies have reduced their tariff rates in the recent years, however, there exists import restrictions in terms of non-tariff barriers. There has been a rise in the incidence of technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS) applied by the BRICS. Apart from these, the prevalence of anti-dumping measures, countervailing duties and safeguards have also affected intra-BRICS trade.

In order to expand cooperation in trade among BRICS countries, the following goals should be pursued:

• enhancing consultations and exchanging information on macroeconomic and trade policies;

• encouraging trade and investment links between BRICS countries with an emphasis on promoting market access on goods and services amongst BRICS countries and supporting industrial complementarities, sustainable development and inclusive growth;

• simplifying and increasing the efficiency of administrative procedures to facilitate and accelerate mutual trade and investment;

• improving the transparency of trade and investment climate in the framework of international obligations and national legislation; and

• creating favorable conditions for development of mutual trade and foreign direct investment in the BRICS countries in order to diversify production and exports.

Exim India’s Endeavours to Harness Synergies with BRICS countries

Export-Import Bank of India (Exim India or the Bank) has played a catalytic role in augmenting India’s increasing integration with the global economy, with particular reference to the countries of the South. The BRICS economies have been a focus region for Exim India, and thus a critical component of its strategy to promote and support two-way trade and investment. As a partner institution to promote economic development, the commitment towards building relationships with the BRICS economies is reflected in the various activities and programmes, which Exim India has set in place.

Exim India is the nominated member development bank from India under the BRICS Interbank Cooperation Mechanism. Other nominated member development banks from other BRICS nations are: Banco Nacional de Desenvolvimento Economico e Social (BNDES), Brazil; State Corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank), Russia; China Development Bank Corporation (CDB), Chinam, and Development Bank of Southern Africa (DBSA), South Africa.

In April 2010, Exim India entered into a Memorandum of Cooperation (MOC) with BNDES, Vnesheconombank, and CDB, in the BRIC (Brazil, Russia, India, China) Summit held in Brazil. The MOC signed in the presence of Heads of four States/ Governments seeks to develop crossborder transactions and projects of common interest; strengthen and enhance trade and economic relations between BRIC countries and its enterprises; and finance the investment projects and to work towards economic development of BRIC countries.

Towards fostering institutional linkages, the Bank entered into a Framework Agreement on Financial Cooperation with BNDES, Vnesheconombank, CDB, and DBSA at the third BRICS Summit, held in Sanya, China in April 2011. The Agreement aims to facilitate financial cooperation among the partner development banks of the BRICS countries, with a view to promoting trade and investment for economic development. As a follow-up to this Agreement, the Bank hosted a Technical Group Meeting in Kumarakom, Kerala, in February 2012, during which the member development banks discussed and finalised two Agreements viz., ‘Master Agreement on Extending Credit Facility in Local Currency’ and ‘BRICS Multilateral Letter of Credit Confirmation Facility’. During the fourth BRICS Summit hosted by India in New Delhi in March 2012, Exim India signed these two multilateral financial cooperation agreements with other member development banks. The Bank also hosted the Annual Meeting and Financial Forum under the BRICS Interbank Cooperation Mechanism coinciding with the fourth BRICS Annual Summit at New Delhi.

Exim India has signed two multilateral financial cooperation agreements with other member development banks of BRICS nations, in the presence of Heads of States/Governments of the BRICS countries during the fifth BRICS Summit 2013. The two agreements signed during the occasion are: (i) BRICS Multilateral Infrastructure Co-financing for Africa; and (ii) BRICS Multilateral Cooperation and Co-financing Agreement for Sustainable Development. These two agreements are aimed at setting broader agenda for cooperation in these key areas; and are expected to enhance cooperation among BRICS development banks to promote intra-BRICS trade. Exim India has also been participating in the Annual Meetings of the BRICS Financial Forum, under the BRICS Interbank Cooperation Mechanism.

Exim India has entered into a Cooperation Agreement on Innovation with the four major development banks of other BRICS countries, which was signed in the presence of Heads of States/Governments of the BRICS countries, during the sixth BRICS Summit held in Fortaleza, Brazil, in July 2014. The Agreement is expected to enhance cooperation among BRICS development banks in the field of innovation and to promote intra-BRICS cooperation in innovation financing.

During the seventh BRICS Summit held in Ufa, Russia, in July 2015, Exim India entered into a multilateral cooperation agreement with other member development banks of BRICS expressing their intent to co-operate with the New Development Bank (NDB). The Bank also entered into a co-operation agreement with BNDES at Ufa, Russia on the sidelines of the 2015 Annual Meetings of the BRICS Interbank Co-operation Mechanism. This MOU is aimed at sharing of knowledge, information and best practices; capacity building of personnel, including project development skills; promotion of joint events, research and programmes; development of effective and sustainable financing solutions for projects of mutual interest, including projects in third countries, such as PPP projects; and co-financing.

• Presidency of the BRICS Interbank Co-operation Mechanism

India has assumed the Chairmanship of BRICS Forum for 2016 and Exim India, being the nominated member development bank from India, has assumed the Presidency of the BRICS Interbank Co-operation Mechanism. The Bank organised a Technical Group meeting in Udaipur, during March 10-11, 2016, to discuss various areas for furthering co-operation among member development banks. During India’s Chairmanship, the Bank has planned a series of events and seminars, including the Annual Meeting and the Financial Forum of the BRICS Interbank Cooperation Mechanism.

• Cooperation with NDB

Exim India entered into a multilateral co-operation agreement, along with Chairmen/Presidents of other member development banks of BRICS nations, expressing their intent to co-operate with the NDB promoted by the BRICS nations. This Agreement is aimed at setting a broader agenda for co-operation with the NDB guided by the existing international banking practices; the principles of equality, mutual benefit and responsible financing; and the existing partnership among the BRICS national development banks. The Agreement is expected to enhance cooperation between BRICS development banks and the NDB, individually or collectively, on sharing of information, knowledge and experiences; extending guarantees and counter guarantees; co-financing; and issuance of bonds, among others. The Agreement was signed in the presence of Heads of States/Governments of the BRICS countries in Ufa, Russia during the BRICS Summit 2015.

• Exim Bank of India BRICS Economic Research Award

During India’s Presidency under the BRICS Interbank Co-operation Mechanism, Exim India has instituted the Exim Bank of India BRICS Economic Research Award, with the objective to encourage and stimulate advanced research on economics related topics of contemporary relevance to the member nations of BRICS. The Award, comprising a citation and prize money of Rupees 1.5 million (approximately US$ 20,000) would be supported by the Bank. The jury will accept as entries doctoral theses written by nationals of any of the five member nations of BRICS, who have been awarded a doctorate or accepted for award of a doctorate from any recognised nationally accredited University or academic institution globally.

• Other Activities

In 2015-16, Exim India conducted two seminars in Delhi and Ahmedabad on “Capacity Building Programme on Promoting Trade and Investments with BRICS countries” in association with Federation of Indian Chambers of Commerce and Industry.

Exim India organized a 10-day handicraft artisans training programme in Jaipur under the aegis of BRICS on September 7, 2016. The training programme jointly organized with National Centre for Design and Product Development (NCDPD) had 46 participants from the five BRICS nations. The workshop was organized with an objective of creating awareness on hand-embroidery and stitching patterns among BRICS nations. The artisans developed home furnishing and utility products by combining fusion of various crafts such as Gota, Chikankari, Kachchi Embroidery, Zari/Zardozi, Crewel Embroidery, Sozni, Ari from India and Dimensional Embroidery (Brazil), Chain Stitch (Russia), Suzhou (China) and Kaross (South Africa) which are popular handicraft design styles from the BRICS Nations.

Exim India plays a major role in partnering Indian industries, particularly the Small and Medium Enterprises through a wide range of products and services. Exim India, with its comprehensive range of financing programmes (which include Lines of Credit, Buyer’s Credit under National Export Insurance Account, and Overseas Investment Finance, among others), advisory and support services, seeks to create an enabling environment for enhancing two-way flow of trade, investment and technology between India and other BRICS countries. While promoting infrastructure development and facilitating private sector development in host countries, the various efforts of Exim India, ensconced in its range of activities, also contribute towards institutional building in these countries.

EXIM Bank’s Working Paper Series is an attempt to disseminate the findings of research studies carried out in the Bank. This paper was compiled by Mr. David Sinate, Chief General Manager; Mr. Vanlalruata Fanai, Assistant General Manager; and Ms. Snehal Bangera, Manager. Views expressed do not necessarily reflect those of the Bank.

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