The four-nation grouping of major emerging economies-Brazil, Russia, India and China (BRIC)-is a key driving force for global growth. Trade collapse and drying up of capital flows have hurt most nations including BRIC. China and India, with vast domestic markets, hope to sustain growth with 7 and 6 per cent respectively. Russia, a big oil and gas producer, badly hit by fall in energy prices and capital flows, will see growth shrink this year by 6.5 per cent. For Brazil, another commodity exporter, the decline would be relatively modest at 1.3 per cent. All BRIC economies are expected to make strong recovery in 2010.

BRIC, an informal grouping at present, accounts for 15 per cent of global output and 42 per cent of world population. The four nations have been key players in global economy but till recently formed part of an 'outreach' group of countries invited for consultations at the summits of the rich. Now they are part of G-20, an apex group of developed and developing nations, which has held two summits since November 2008 to fashion global responses for a crisis spreading worldwide. It is setting norms for ensuring international financial stability and mobilising enlarged support for poorer countries.

Greater voice for emerging economies...

Russia's President, Dmitry Medvedev, hosted the first formal Summit of BRIC on 16 June attended by prime minister Manmohan Singh, President Hu Jintao of China and President Luiz Inacio Lula da Silva (Brazil). The four leaders renewed their call for restructuring the global economic system to provide greater voice and representation for emerging and developing economies in international financial institutions and for reform of international financial architecture with strong regulatory regimes. IMF has already been directed by G-20 to work on governance reforms and complete, by January 2010, its work on quota revision to reflect changes in the economic weights of its 185 member-nations.

BRIC stands for a multi-polar world with a central role for the United Nations in dealing with global issues and threats. Favouring comprehensive reform of UN, to make it more efficient and tackle effectively global challenges, the summit said it attached "importance to the status of India and Brazil in international affairs" and supported their aspirations for a greater role in UN. This is significant in the context of these two nations seeking permanent member status in the Security Council akin to that enjoyed by Russia and China since the founding of UN. China, in particular, has not, till now backed India's case.
The statement also reaffirmed commitment to the multilateral trading system and called for a push for the successful conclusion of the Doha Trade Round negotiations which would help accelerate world recovery.

Different political systems, varying resource endowments...

BRIC comprises countries with different political systems and varying resource endowments. Russia and Brazil are rich in energy resources while China and India are highly dependent on imports. China has tied up with both Russia and Brazil for energy supplies on a sustained basis including participation in exploration and laying of pipelines across central Asia. According to President Lula da Silva, BRIC, with trade expansion, generates 65 per cent of global growth.

Dethroning dollar?

US running into huge deficits and debts and focusing on recovery from recession, has caused some concern to China, voiced by its Premier Wen Jiabao, about 'safety' for its dollar investments in US treasury bonds and other assets. US Treasury Secretary Timothy Geithner, on a visit to Beijing, assured him that their investments were 'very safe' in his country and that the Obama Administration remained committed to trimming budget deficits and maintaining a strong dollar.

The dollar's role as the universally accepted international reserve asset has come into question, especially after China's central bank governor talked of the need for a supra-national reserve currency as the dollar was primarily US national currency doing double duty. The weakening of the dollar value from time to time is seen to create risks of capital loss for investors. Russia has also been talking of diversifying investments of its surplus petro-dollars. Lately, China had slowed down its purchases of American financial assets and by end of April, its holdings stood at 763.56 billion, still higher than Japan's 685 billion dollars. Brazil holds 126 billion dollars.

The role of the dollar was discussed at the BRIC Summit with all the caution needed to protect the value of their assets in USA. IMF and other global monetary experts assert that, whatever said, the dollar would remain the international reserve asset for the foreseeable future. (Special Drawing Rights) SDR, created by IMF, serves as its unit of account and is not regarded at present as a possible alternative to the dollar for use as an international reserve currency.

The Russian President had perhaps hoped the Summit could possibly consider a roadmap for a new reserve currency. Ideas were exchanged with no concrete proposals on reducing the use of dollar in this regard. The BRIC vaguely spoke of "a more diversified international monetary system."

India has not embraced the idea and Dr. Manmohan Singh pointed out that such complex issues required to be examined at the level of finance ministers and central bank governors. BRIC reserves total $ 2.8 trillion, China accounting for $ 1.9 trillion. China and Russia are trying to promote the use of national currencies for trade wherever possible.