What does the inclusive growth championed by BRICS mean?

The inclusive growth of BRICS could enable emerging countries and their populations to benefit most from the global economy. Such ambition goes beyond the redistribution of wealth, however the commitments adopted in New Delhi remain difficult to measure.

Growth that involves more populations

The leaders of the BRICS alliance put “inclusive global economic growth” at the center of their summit on September 12 and 13 in New Delhi. This concept starts from a simple observation. An increase in gross domestic product may not immediately guarantee an improvement in living standards for the entire population.

Growth therefore becomes inclusive when many people participate directly in the creation of value. It is then based on productive employment, education, health, access to credit and the presence of sufficiently developed infrastructure.

Multiple elements make it possible to understand this approach:

• The jobs created must offer sustainable income;
• Small businesses must have easier access to financing;
• Disadvantaged populations must benefit from public services;
• Remote territories must benefit from infrastructure;
• Growth should not rely on a few sectors or social groups.

Narendra Modi has noted :

We have tried to promote inclusive global growth.

This is not a notion invented by the BRICS. The World Bank and other international organizations have used it since the 2000s. They simultaneously assess the pace of growth and how its benefits are distributed.

BRICS extends the principle to interstate relations

Now, the alliance is transposing this logic on a global scale. An inclusive international economy must not exclusively produce more wealth. It must offer the possibility for more countries to join high value-added activities and participate in the development of rules.

Thus, BRICS demand better access to technologies, financing and global production chains. They demand that emerging countries not remain simple suppliers of raw materials or cheap labor.

Such a claim also concerns global governance. Thus, the New Delhi Declaration calls for significant representation of developing economies in the International Monetary Fund and the World Bank.

The BRICS bloc constitutes about half of the world’s population, nearly 40% of GDP and more than a quarter of international trade, according to data released by the Indian presidency. Its weight consolidates its demand for reform of the institutions founded at the end of the Second World War.

The BRICS Bank must finance this ambition

The New Development Bank represents the bloc’s main financial instrument. Founded in 2015, it finances infrastructure, energy projects, transport, water networks and various sustainable development programs.

At the end of June, the institution had approved 141 projects for a cumulative sum of $44 billion. This amount represents an average of nearly $312 million per project. Nevertheless, it remains modest compared to the financing needs of the eleven member countries.

BRICS countries also want to expand the use of national currencies in trade and investment. Their objective is to reduce transaction costs and their dependence on circuits dominated by the dollar.

Yet the summit created no common currency. The bloc’s authorities favor the interconnection of existing payment systems. Such a method takes into account the differences between monetary policies and avoids the automatic creation of a supranational central bank.

This declaration also supports open multilateral trade based on the rules of the World Trade Organization. At the same time, it denounces unilateral sanctions and trade barriers incompatible with these rules.

Internal differences limit results

First, the inclusive growth of the BRICS comes up against the imbalances present within the group. Indeed, China has industrial and financial power significantly greater than that of several partners. In particular, India had recorded a trade deficit of 112 billion dollars against Beijing.

The member countries do not share the same geopolitical interests either. Some have close relations with the United States, while Russia and Iran face significant Western sanctions. Such postures complicate the adoption of common financial mechanisms.

In New Delhi, however, the statement obtained reveals that the bloc can reach a compromise. The leaders defended multilateralism. They called for maximum restraint in the Middle East, despite disagreements between Iran and the United Arab Emirates.

From now on, the main test may come from the application of commitments. The financing volumes of the New Development Bank, the place of local currencies and the real access of companies to value chains will make it possible to assess whether this inclusive growth goes beyond diplomatic discourse.