“BRICS Countries’ Impact on the Global economy”

Geet Sanganeria Student

Atlas SkillTech University

ABSTRACT

This research paper's central emphasis is the influence of the BRICS countries on the global
economy for a wide time range which stretches from the formation of brics till today but has
major emphasis for the years from 2017 to 2023. Global economic power has undergone an
astonishing restructuring since the founding of the BRICS. Given their big and youthful
populations, the BRICS countries still have enormous economic potential. The BRICS countries'
biggest challenge in bridging the gap between their living standards and those of established
market economies will be to maintain high and sustainable growth. However, it is not feasible to
anticipate that a prolonged catching-up process will be seamless and free of notable oscillations.
The BRICS countries will soon face some major challenges, and history reminds us that not all
countries are equally effective in conquering these challenges. All of them must contend with the
challenge of preserving macroeconomic stability while ensuring sustainability at a rapid rate of
expansion. Reforms in the financial system are required to better control increasing capital flows
and direct local savings into successful investments. The BRICS countries have a lot of
characteristics, yet there are also big differences between them.

KEYWORDS

BRICS countries, global economy,growth,world trade organization

INTRODUCTION

Brazil, Russia, India, China, and South Africa are together referred to as BRICS. The acronym BRIC
(without South Africa) was created in 2001 by Goldman Sachs economist Jim O'Neill, who predicted that
by 2050, the four BRIC economies would take control of the world economy. In 2010, South Africa was
added to the list. Since the inaugural BRIC (Brazil, Russia, India, and China) meeting in 2006,
cooperation between Brazil, Russia, India, China, and South Africa (BRICS) has grown. We have been
witnesses to the establishment of a variety of BRICS organizations, such as the New Development Bank
and the Contingent Reserve Arrangement. Global economic power has undergone an extraordinary
reconfiguration over the last 20 years. (Hooijmaaijers, B. 2021). This has been primarily fueled by the
rise of China and, to a lesser extent, the BRICS nations in general, which also include Brazil, Russia,
India, and South Africa in addition to the East Asian giant. The concern stems from the fact that the
BRICS have, to varying degrees, grown increasingly nationalist and authoritarian over the previous ten
years, with the possible exception of South Africa (Reddy, 2022). Even if it is somewhat arbitrary to
concentrate on these five economies in particular, they are among the biggest in the world in terms of
their populations and economies. The BRICS nations also control the developing market economies
financially(Nistor, P. 2015). This article evaluates the BRICS countries' current position in the global
economy and briefly outlines their historical growth. These economies' long-term prospects are discussed
in the context of economic theory. (Nayyar, D.2016).

RESEARCH QUESTIONS

Q1) To highlight the formation of BRICS

Q2) What is the impact of BRICS countries on the global economy?

Q3) What is the BRICS relationship with the global economy?

LITERATURE REVIEW

(Beeson, M., & Zeng, J. 2018).highlighting the impact of BRICS (Brazil, Russia, India, China, and South
Africa), on the status quo of the international system is examined by Beeson He mentioned that , brics
will find it challenging to preserve agreement among themselves, let alone contribute positively to
safeguarding the principles of "global governance. This study analyses the characteristics of each
(BRICS) country's economy that support this prediction and identifies some of the global challenges that
might prevent it from coming true. In particular, it analyzes how difficult it is to conduct business in each
country and discusses how this, along with the absence of long-term circumstances that would encourage
growth, undermines these countries' potential to drive the future global economy.

(Radulescu, I. G., Panait, M., & Voica, C. 2014). This study examines the significance of the BRICS
alliance as emerging market nations' representation in the world economy. It is important to note that the
BRICS group performed far better economically than industrialized nations and was not significantly
impacted by the financial crisis. Increased input of forces and vast ranges of population and resources
were the key drivers of the group's economic growth. Estimating whether the BRICS countries will
experience the same rising trend was a concern given the weaknesses found among them, including the
high level of corruption, political divergences, overexposure to commodities, etc.

(Hooijmaaijers, B. 2021). This article explores the ways in which China and the BRICS are redefining
international economic governance, as well as the extent to which the BRICS and its institutions are
innovative. More crucially, it examines how China uses the BRICS to reform global economic
governance and the possibility that its own initiatives could neutralise the influence of the BRICS. It
demonstrates how the BRICS' dynamics constrain their ability to alter international economic governance.
The internal politics, economies, and interests of China, India, and the other BRICS nations, which all
have unique positions and preferences within the international system, are crucial.

(Nayyar, D.2016). This article analyses how the emergence of the BRICS would affect global
governance and the developing world. In doing so, it analyses the circumstances driving the development
of the group as an economic and political formation and examines the growing significance of the BRICS
among emerging nations and in the global economy, set in historical perspective. This is followed by an
analysis of the potential economic impact of future BRICS growth on other emerging countries, which
might be complementary or competitive, positive or negative. In light of international organisations and
regional cooperation, it explores the possible impact of BRICS in the broader global context, going
beyond economics to politics.

(O’neill, J 2011).To demonstrate that a straightforward comparison between China and Italy is provided.
The Chinese economy is marginally larger than Italy's, even on a basis of current GDP, therefore an
expansionary monetary or fiscal policy in China would probably have a somewhat greater global impact
than comparable policies in Italy. This may be especially important if the bordering region is more
severely affected than other areas by an economic "shock" like the Asian Crisis of 1997–1998. Evidently,
the fact that China's economy is roughly four times larger than Italy's increases the relative impact of
policy change if PPP weights are more representative than current GDP.
( Dominic Wilson.2016). The author talks about how the BRICS are represented in the Global Economic
Governance (GEG) and the institutional repercussions of their efforts to make up for their lack of
representation in international institutions. Dominic Wilson. began with the observation that multilateral
organizations must sufficiently reflect all of the significant powers in the international system in order to
be stable, functional, and legal. This point is shared by key International relations theories. The G7/G20,
the World Trade Organization, the International Monetary Fund, and the World Bank are the four primary
GEG institutions that we address in relation to representation disputes between BRICS and the
established powers.

(Nistor, P. 2015)Nistor suggests the group of BRICS nations—Brazil, Russia, India, China, and
South Africa—is seen as having the most developed economy among emerging nations. This
essay examines the impact of FDI on the BRICS economies. The volume and composition of
these flows determine how much FDI will affect the host nation. In the current economic
context, host nations compete with one another to draw in the highest quantities of FDI. The
BRICS group provides a variety of advantages to international investors, including a young labor
pool, a cheap labour force, natural resources, and sizable markets. FDI appears to have a
favorable effect on these developing countries by aiding in their development.

(Carnoy. 2014). This article analyzes the relevance of the BRICS group as a representative of developing
market countries in the global economy. The BRICS group did far better economically than industrialized
countries and was not seriously harmed by the financial crisis, it is crucial to mention. The main causes
behind the group's economic expansion were the increased input of forces and the extensive ranges of
people and resources. For instance, huge mineral resource reserves and market speculation are the main
drivers of the economies of Brazil and Russia. Due to its cheap labor and resources, China gains. India
too depends on an inexpensive labor force.

(Paulo 2021) Brazil, Russia, India, China, and South Africa (BRICS) have increased their collaboration
since the first BRIC (Brazil, Russia, India, and China) conference in 2006. A number of BRICS
organizations have been founded, including the New Development Bank and the Contingent Reserve
Arrangement. China has more political and economic sway over the BRICS than any of its allies
combined. Beijing has also promoted its own initiatives, like the Belt and Road Initiative (BRI), which
has soured ties with other BRICS members like India. Beijing has also supported the Asian Infrastructure
Investment Bank. This article examines the inventive capabilities of the BRICS and its institutions, as
well as the manner in which China and the BRICS are reinventing global economic governance.

RESEARCH METHODOLOGY

The research method adopted in the present study is through adequate secondary sources of information.
The secondary sources of information have been gathered from the following :

(A) Journals(Brics journal on Economics,2022),magazines(Brics business magzine,2023),

newspapers(The Hindu,2022).

(B) Books written by eminent authors.(Kirton,2019)

(C) The secondary data about the Impact of BRICS nations on the global economy.

(Radulescu, I. G., Panait, M., & Voica, C. 2014)

DISCUSSIONS

In terms of population (40%), GDP (25% nominal and US$ 16.039 trillion), land covering (30%),
international commerce (18%), and worldwide forex (US$ 4 trillion), the BRICS play a key role in the
global economy.(O’neill, J 2011) The BRICS collectively worked on sectoral cooperation in several
areas, including science and technology, trade promotion and facilitation, energy, health, education,
innovation, and the fight against transnational crime, since 2001 and up until the end of 2010. Sectoral
cooperation now covers more than 30 different topics. The people of the group of countries have
benefited specifically from these locations. (Nayyar, D.2016).

The majority of the world's population is concentrated in the BRICS nations. China has the highest
concentration 141.24, followed by India140.76.(WORLD BANK,2021) The formation of the BRICS took
into account a number of aspects, such as the fact that each country has distinct interests and that by
working together they can control a number of industries in the future. Each of these nations has unique
strengths and weaknesses, such as China is the most populous country and has been a continuously
existing civilization, but it also has a very tense political past. India is the world's second-most populous
nation, has the second-longest history of civilization, and has a wealth of natural resources. Russia is one
of the oldest nations, and since the middle ages, it has been regarded as a single cultural entity. Brazil is
regarded as a colonial construct, has a slowly growing economy, and encourages the industrial economy.
Impact of BRICS on the global economy: (Brics journal on Economics,2022)The BRICS aim to eclipse
the G7 in the next two decades and dominate a fifth of the global economy in the next two years. The
BRICS must progress in every area in order to make such significant economic strides. In general, the
GDP of the nations doesn't appear to be sufficient at the time to enable it to reach the predicted level, and
this is justified due to a number of variables, including the internal relationships of the BRICS as well as
the economic ties that each of the BRICS maintains separately. Another significant finding is that from
the sixteenth century, the same nations have controlled the global economy.(The Hindu,2022) All of the
BRICS nations are still developing, therefore the objective they have set looks unattainable. The BRICS
relationship with the global economy: A nation must advance in both structural and political aspects in
order to be successful in the financial market. A strong leader with a vision for the future can aid the
nation in achieving both goals. (Radulescu, I. G., Panait, M., & Voica, C. 2014) The long-term objective
was not visible to the leaders of China and Russia. China failed specifically because of its unstable
political system, while Russia failed because it was unable to successfully transition to capitalism. Out of
the BRIC nations, China is the only one that is attempting to establish itself as the dominant currency, but
the truth is that it is far from having achieved this. Russia also has a significant issue because it has lost a
lot of its properties and natural and human resources and hasn't been able to fully recover from these
losses. The situation isn't quite the same for Brazil and India. India now leads the world in terms of the
quality of the electronic services it provides, but it will take a long time for the country to make up for the
financial losses it suffered as a result of being colonized first by the Mughals and later by the British.
Brazil has a generation of eager employees who are engaged in agricultural operations, but due to low
technical and educational standards among the populace, it won't be able to fully capitalize on this. But
there has also been a considerable increase in these nations. Russia and China joined the IRBD and the
IMF. Russia also became a G7 member. India and Brazil, on the other hand, displayed a typical
"developmentalist" policy. India has made the service sector a priority, while Brazil has made great
efforts to develop its agriculture sector. (Hooijmaaijers, B.2021).

BRICS appears to perform better, more effectively, and more efficiently than other global governance
institutions in the midst of the ongoing COVID-19 pandemic problem. Although the group's member
nations do not all have the same level of economic growth, it is noteworthy that they are all striving
toward the same goal of enhancing collaboration in the social welfare and health care sectors. (Nayyar,
D.2016).

Unilateralism and Trade Protectionism: Following the Global Financial Crisis in 2008, unilateralism and
trade protectionism have recently surged. The developing economies have suffered as a result of the trade
war between the US and China that the Trump administration is waging. WTO Press Release 2019:
"Trade growth in 2018 was weighed down by several factors, including new tariffs and retaliatory
measures affecting widely traded goods, weaker global economic growth, volatility in financial markets,
and tighter monetary conditions in developed countries, among others" The 11th BRICS summit
recognized that trade tensions and policy uncertainties have had a negative impact on confidence, trade,
investment, and global economic development. (Nistor, P. 2015)

Poor intra-BRICS trade: The global fall in trade has an influence on the intra-BRICS trade relations.
According to a working paper by EXIM Bank, high and rising trade costs as well as a trade policy
environment that is restrictive have been the main factors holding back the expansion of intra-BRICS
trade. The increase in the number of sanitary and phytosanitary measures (SPS) and technical trade
barriers (TBT) implemented by the BRICS is another significant factor contributing to the fall in intra-
BRICS trade. The BRICS countries are concerned about the expansion of anti-dumping and
countervailing levies, among other things. In comparison to affluent countries, the number of RTAs is
likewise negligible. (O'neill, J 2011).

The industrialized countries dominate free trade agreements:The BRICS economies, who are not eligible
for the privileged access provided by the partners of the two mega accords, would suffer as a result of the
Trans Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) major trade
deals. The US's withdrawal from the TPP in January 2017 makes the agreement's approval and
subsequent implementation all but impossible. The EU and the US are now negotiating the TTIP, which
is a planned trade deal. (Hooijmaaijers, B. 2021).
Bottlenecks in BRICS's structure include:The BRICS countries are particularly sensitive to the outside
environment because of their over-reliance on capital investments and exports. This might be the outcome
of excessive liquidity spillovers from the monetary policies of advanced nations, which could cause cross-
border banking flows, exchange rate volatility, and inflated assets in capital-receiving nations.
Additionally, according to a 2015 assessment by the BRICS Think Tank Council, the "rebalancing" of the
world economy might result in a sluggish expansion of global demand overall and limit the BRICS'
development options. (Brics business magzine,2023)The inflation rates in the BRICS nations are also
typically growing (Ibid.). In order to implement fundamental reforms in their economies, the BRICS
countries must spend on infrastructure, public goods, and research and development. (Beeson, M., &
Zeng, J. 2018)

The long-term link between the stock

markets of the BRICS countries has
been examined using the ARDL
cointegration technique. (Paulo
2021) The ARDL discovery
demonstrates the presence of a long-
term link between the stock markets
of Russia, China, and South Africa at
a 5% level of significance. A 1%
increase in Chinese stock prices
increased the Russian stock market
by 13%, whereas a 1% gain in Russian stock prices increased the Chinese stock market by 8%, according
to the value of f-statistics with probability. The South African stock market rose by 17% following a 1%
increase in the Indian stock market, and by 19% following a 1% increase in the South African stock
market.( Dominic Wilson.2016)

Since the formation of the BRIC and later the BRICS, the importance, contribution, and role have all
grown gradually and consistently. A special issue on the BRICS was launched by the Global Journal of
Emerging Market Economies (GJEME), a SAGE publication, and it invited contributions from renowned
academics all around the world. Out of the total entries that address various topics relevant to the BRICS
economies, seven papers have been chosen. (Nayyar, D.2016).

It has been noted recently that the BRICS nation plays a dynamic role in the global economy. The BRICS
countries account for 41% of global population, 16% of global trade, and 16% of global GDP. The April
2021 WEO projected that, compared to pre-pandemic projections, approximately 95 million people had
fallen below the poverty level in 2020. The International Labour Organization predicted 81 million job
losses, an 8.3% decline in international labor revenue, and an 8.8% drop in business hours when
examining the effects of COVID-19 on labor markets for 2020 (IMF 2021). (O'neill, J 2011).

CONCLUSION

It has been noted recently that the BRICS nation plays a dynamic role in the global economy. The BRICS
countries account for 41% of global population, 16% of global trade, and 16% of global GDP. The April
2021 WEO projected that, compared to pre-pandemic projections, approximately 95 million people had
fallen below the poverty level in 2020. The International Labour Organization predicted 81 million job
losses, an 8.3% decline in international labor revenue, and an 8.8% drop in business hours when
examining the effects of COVID-19 on labor markets for 2020 (IMF 2021). (Nayyar, D.2016).

Reforms and increasing openness have strengthened the BRIC nations' importance in the global economy
during the past few years. These nations still have significant growth potential, particularly in light of
their sizable and youthful populations. Maintaining strong and sustainable growth will be the BRICS
nations' greatest obstacle in closing the gap between their living standards and those of mature market
economies. However, expecting an extended catching-up process to be smooth and devoid of significant
oscillations is hardly a reasonable expectation. (Nistor, P. 2015) The BRIC nations will eventually have to
deal with some significant obstacles, and history teaches us that not all nations are equally successful in
overcoming these obstacles. They are all faced with the issue of maintaining macroeconomic stability
while ensuring sustainability at a high growth rate. Financial sector reforms are necessary to better
manage escalating capital flows and channel local savings into profitable investments. There are many
traits that the BRIC nations have in common, but there are also significant disparities. Brazil's economy
will need to be opened up in order to grow its domestic savings base and finance projects, which will be a
significant task. The main issues in India are increased openness, higher education, and improved
infrastructure. In Russia, the task is to minimize the economy's reliance on oil and to battle corruption.
Current state-owned enterprise and bank reforms in China will be given top attention. (Hooijmaaijers, B.
2021).

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