In the wake of the BRICS expansion, with six more countries Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and UAE, joining the club from 1 January 2024, India could have significant trade opportunities in several commodities as it holds a 57% share in the export basket and a better revealed comparative advantage, SBI Research says in its latest report.
The data shows the revealed comparative advantage is going to increase with the inclusion of six new members in some of the commodities, including fuel, chemicals, animals, food products, textiles, and plastic & rubber.
The bilateral trade between India and the six new countries has increased in the past decade. While India’s exports increased to Argentina, Egypt, and Saudi Arabia, its imports rose with Ethiopia, Saudi Arabia, and the UAE.
Revealed comparative advantage indicates there is a scope for further increasing the bilateral trade between India and these six countries. "India can increase its imports of animals from Argentina; wood, food products and plastic/rubber from Egypt and hides & skins from Ethiopia. Meanwhile, other countries can increase import of animals, hides and skins, metals, chemicals, and consumer goods from India, in which India shows revealed comparative advantage," the report says.
The New Development Bank of the BRICS group of nations, earlier known as BRICS Bank, now has Egypt, Bangladesh, and the UAE as its shareholders. BRICS leaders say the bank will play a crucial role in support of development projects in Africa and the Global South.
"The establishment of NDB is good for developing countries in need of financing," says the SBI report, adding the World Bank and the IMF, often tend to attach conditions to the funding they provide.
"The IMF does not ask for collateral when it lends money to troubled countries; instead it prescribes economic policies that the country must follow. The question of whether the NDB will also want to have a say in a country’s policies in exchange for funding is still open and very topical, given the clients of the bank will be poor countries, where the risk of being unable to repay the loan is inherent," the report says.
NDB is a multilateral development bank created in 2014 by BRICS countries to mobilise resources for infrastructure and sustainable development projects, with an authorised capital of USD 100 billion. The membership is open to members of the United Nations. NDB is headquartered in Shanghai, China, with a regional office in Johannesburg, South Africa.
In 2021, the NDB began its membership expansion and welcomed three new members: Bangladesh, United Arab Emirates, and Egypt. The NDB board of directors has approved over 90 projects in all member countries for a total amount exceeding $30 billion so far, including investment in Brazil at 18%, Russia at 14%, India at 24%, China at 25%, and South Africa at 18%.
Of the total loans, 65% are in USD, while 8% are in euros. NDB, thus, can make local currency funding available to all member nations. As the RBI recently permitted 20 banks operating in the country to open 92 Special Rupee Vostro Accounts (SRVAs) of partner banks from 22 countries to promote bilateral trade in local currencies, the trade in the rupee would be more favourable, the report says.
India, it says, can boost trade in the rupee with partners such as Russia, Saudi Arabia, Egypt, and the UAE, where it is a large importer and potential exists for Indian exports as well.
BRICS countries have a 40% share of the world population and account for one-fourth of the global GDP.
With BRICS+6, the GDP share will increase to 30% of global GDP. The major impact will be on the share of global oil production increasing to 40% against 18% earlier.
