BRICS brings changes in global economic landscape

The world economy has undergone profound changes in the last few decades. One of the most important changes in the world economy has been the rise of five major national economies which are Brazil, Russia, India, China and South Africa. Coined by former Goldman Sachs economist Jim O’Neill in 2001, the acronym BRICS refers to these five countries that are distinguished by their large, fast-growing economies and significant influence on regional and global affairs. The group was originally known as BRIC before South Africa joined in 2010. All five countries are members of the G-20.

Brazil is the largest country in both the South American and Latin American region with an area of more than 8.5 million square kilometers. According to the IMF, it has a population of more than 199 million people in 2013 and the sixth largest economy in the world with a GDP (gross domestic product) of US $2.56 trillion. The IMF estimates its GDP per capita at current prices to be US $12,290 in 2013. A country abundant in natural resources, Brazil’s service sector is the largest component of GDP at 67 per cent followed by the industrial sector at 27.5 per cent and agriculture at 5.5 per cent. Brazil has grown very fast for the last three decades from US $148.9 billion in 1980 to its current level; its GDP per capita increased by almost ten times from the 1980 level of US $1,232.

Russia is the largest country in the world with an area of more than 17 million square kilometers. With a population of more than 141 million people, it has the eighth largest economy in the world which stands at US $2.21 trillion in 2013. After the collapse of the Soviet Union, Russia has grown rapidly to reach a per capita income of US$15,650 in 2013. Blessed with natural resources, Russia has moved from a centrally planned economy to a more market-based and globally integrated economy. The service sector is the largest component of GDP (58 per cent), followed by the industrial sector (37.6 per cent) and agriculture (4.4 per cent). Among the BRICS countries, it has the highest per capita income.

India is the largest democracy in the world and the seventh largest country with an area of 3.3 million square kilometers. It is the second-most populous country in the world with a population of 1.24 billion. India started to grow rapidly after it adopted liberal and free-market policies in 1991 and opened its economy to international trade and foreign direct investment. According to the IMF, it has the tenth largest economy in the world with a GDP of US $1.97 trillion and a per capita GDP of US $1,592. Again, the service sector is the largest component of India’s GDP (56.4 per cent), followed by the industrial sector (26.4 per cent) and agriculture (17.2 per cent).

The most populous country in the world, China has a population of 1.36 billion. It has an area of more than 9.6 million square kilometers that makes it the third or fourth largest country by geographical area. It is the second-largest economy in the world after the United States and, has grown at an average rate of over 10 per cent for the last thirty years. It has a GDP of US $9.02 trillion and, a per capita GDP of US $6629. The largest component of the economy is the industrial sector (45.3 per cent) followed by the service sector (44.6 per cent) and the agricultural sector (10.1 per cent).

South Africa is the newest member of BRICS. It is the 25th largest country in the world by land area and has a population of 51.8 million people. The economy of South Africa is the largest in Africa and, is ranked as an upper middle income country by the World Bank. In 2013, it has a GDP of US$376 billion and a per capita income of US $7257. The service sector has the major share of the economy at 65.9 per cent, followed by industry (31.6 per cent) and agriculture (2.5 per cent).

These five countries have grown significantly and, are considered important players in the global economic scenario. Figure 1 shows the rapid growth of the BRICS countries from 1992 to 2013. Except South Africa, all the members of BRICS have joined the trillion-dollar club which refers to the countries that have at least a trillion dollar GDP. Again, Figure 2 shows the combined GDP of the five BRICS members as a percentage of world GDP. In 1992, their combined GDP consisted only 5.7 per cent of the world GDP. After experiencing rapid growth, their combined GDP stands at more than 20 per cent of world GDP of US$74 billion in 2013.
This increase from 5.7 per cent to more than 20 per cent shows the contribution of the BRICS economies to the world economy. While these countries are at various stages of development, they have all grown rapidly to become important players in the global economy.
The rise of the BRICS countries has led to increased trade in the global economy. The increased trade can be classified into three groups:
1. Increased trade with the advanced economies. The rise of the BRICS countries has made them more integrated with the advanced economies. Their business and commerce with the advanced countries have increased significantly. China has become the manufacturing powerhouse due to access to the developed economies. It exports products like clothing, computers and almost everything to the developed countries. The sign ‘Made in China’ has become ubiquitous on the shelves of the stores in the rich countries. Another example is India’s business in outsourcing in information technology. Indian companies develop software or have established call centres for their Western clients. Again, Indian made clothing is exported to Western markets. This shows the increased integration of the BRICS countries with the advanced economies.
2. Increased trade between themselves. There is increased trade between the BRICS countries. Brazil exports raw materials and natural resources to China, which is one of its major export partners. Again, China exports its manufacturing products to the other BRICS members. Therefore, there has been increased trade and economic cooperation between the BRICS countries.
3. Increased trade with the other developing countries. The rise of the BRICS economies has raised their per capita income. Their populations are more affluent than before and buy more products. This has created demand for products made by other developing countries that are smaller in size. Both China and India have become important buyers of natural resources of resource-rich African countries. This has led to infrastructure development and construction of hospitals and schools in the African countries. Again, Chinese manufactured products are widely available in developing countries like Bangladesh. The growth of the BRICS economies has led to increased trade between them and the rest of the developing countries. The trade between the BRICS countries and their trade with other developing countries can be termed as South-South trade which essentially means trade between developing countries.
The phenomenal rise of the BRICS economies has been one of the most fundamental changes in the global economic landscape in the last few decades. While there are debates about how much they will grow, it is widely accepted that they have already become important operators in the global economy. With more than 40 per cent of the world population, the BRICS countries are expected to continue having important influence on the global economy.

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