State Bank of India’s Economic Research Department (ERD) said India could have significant trade opportunities in multiple commodities (57% share of export basket) and better revealed comparative advantage (RCA) following the expansion of the BRICS bloc ).
The main goals of the BRICS (Brazil, Russia, India, China, and South Africa) are rooted in the long-term common interests of member countries, which include: reforming the global financial architecture, strengthening international law, inclusive growth, supporting BRICS complementarity, Regional trade and South-South cooperation.
After expansion, the BRICS group now includes six more countries (BRICS+6) – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates.
In its report, Ecowrap, ERD said the revealed comparative advantage (RCA) indicated that there was room for further increase in bilateral trade between India and the six new countries.
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“Over the past 10 years, the total bilateral trade between India and 6 new countries Egypt, Saudi Arabia and UAE has increased. India’s exports to Argentina, Egypt and Saudi Arabia have increased, while exports to Ethiopia, Saudi Arabia and UAE have increased. Imports have increased,” said Soumya Kanti Ghosh, chief economic adviser at SBI Group.
The total trade volume between India and these six countries increased by 1.07 times compared to 2013, reaching 151.528 billion US dollars. According to the SBI report, more than 30% of India’s crude oil needs are imported from new countries.
“India can increase imports of animals from Argentina; timber, food and plastic/rubber from Egypt and hides and furs from Ethiopia.
“At the same time, other countries can increase their imports of animals, hides and hides, metals, chemicals and consumer goods from India, where India shows a comparative advantage,” the report said.
Payment and Settlement
The ERD underscores that the multilateral monetary order has gained a huge force multiplier through the BRICS group.
“The shares of the three major currencies (USD, EUR and GBP) have fallen significantly over the past two years, led by the depreciation of the euro.
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“Given the voice of member states in bilateral trade, we estimate that payments and settlements should enjoy huge support among member states, as de-dollarization is an ominous sign,” Ghosh said.
He added that the extension of the block heralds the strengthening of rupee payments and settlements within the jurisdiction of the block as the RBI has taken several steps to facilitate the internationalization of the rupee.
BRICS Development Bank
ERD suggested that the New Development Bank (NDB) is a multilateral development bank established by the BRICS countries in 2014 to mobilize resources for infrastructure and sustainable development projects and can provide local currency financing to all member countries.
The report says the NDB needs to support projects that help reduce inequality and help improve the living standards of the still large numbers of poor and excluded people in the global South.
The RBI recently allowed 20 banks operating in the country to open 92 Special Rupee Vostro Accounts (SRVA) for partner banks from 22 countries, as part of a bid to facilitate bilateral trade in the local currency, the report noted.
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“Rupee trade has many benefits, the most prominent of which are lower transaction costs, greater price transparency, faster settlement times, facilitation of international trade, reduced hedging charges, lower costs for the RBI to hold foreign exchange reserves and most importantly, the value of the rupee. Price discovery and internationalization,” said ERD.
ERD’s analysis shows that rupee trade is more beneficial to trading partners such as Russia, Saudi Arabia, Egypt and the United Arab Emirates. India is a major importer for these countries, and India’s exports also have potential.
BRICS needs greater connectivity and more inter-group trade to make progress, the report said, although members must focus on addressing their trade concerns.
ERD believes that a strong BRICS partnership in innovation and the digital economy can stimulate growth, increase transparency and support the Sustainable Development Goals.
India and China need to cooperate more on river water (Brahmaputra) data sharing, entry of Indian pharmaceutical companies into China etc.
India must continue to work with other BRICS countries to reach an understanding with China on cross-border terrorism.
“Climate governance is an area where BRICS members have great potential to contribute,” ERD said.
The Ministry of Foreign Affairs emphasized that the establishment of the New Development Bank is beneficial to developing countries that need financing.
It noted that the World Bank and the International Monetary Fund, especially the latter, often attached conditions to the financing they provided.
“The IMF does not require collateral when it lends to troubled countries; rather, it prescribes economic policies that countries must follow.”
“The question of whether the NDB also wants to have a say in a country’s policy in exchange for funding remains open and a very hot topic, as the bank’s clients will be poor countries that are facing debt insolvency risk. Lending is inherent,” the report said.