India well placed to get support from Global North

Aunindyo Chakravarty

Senior Economic Analyst

IF you go to Japan, you can buy a popular packaged snack containing five breadsticks, sweetened with red beans. They call it ‘kataoya pan,’ which translates into ‘single-parent bread,’ because that is what children growing up in single-parent homes get to eat for lunch. That is all. Japan, which once boasted that 90 per cent of its population was middle-class, today has a problem of a growing ‘kakyu kokomin’ or ‘lower-class citizens’.

Go West towards Europe to Italy, and in every town, hundreds queue up every morning to get free food packets from volunteers. Many older people, living on their own, cannot afford cooking gas or electricity to run their ovens to cook meals at home. In Germany, Europe’s richest nation, one in every nine families is too poor to eat meat, fish or vegetables. In neighbouring France, a new survey shows that nearly half of the population has cut out fruits and vegetables from their meals, and one-third cannot afford to have three meals a day. Across the Channel, in the UK, nearly a quarter of the population lives in poverty, half of whom cannot afford two square meals a day. Some of them are surviving on pet food.

Fly across the Atlantic to the world’s richest nation, and you will find a country of extreme inequality. Estimates suggest that three-fourths of Americans experience poverty or near-poverty for at least one year of their life. Right now, despite the US economy doing much better than that of others, a quarter of American workers earn ‘low pay’ or wages that are two-thirds of the median wages. One-third earn less than minimum wages, and nearly 85 per cent are made to work long hours without any overtime. Across the border, in Canada, which has a strong welfare system, one in five families says it is finding it tough to meet monthly living expenses. Things could only be worsening, now that Canada’s economy is in a recession.

Why are these seven nations worth talking about? It is because together, they constitute the world’s most powerful economic bloc — the G7 — which has dictated global economic policies for the best part of the past four decades. It is now clear that these nations are in permanent economic decline. And it is not Covid-19 which has caused this crisis — much of their problems predated the emergence of the virus. The pandemic exacerbated what was already a very grave situation. Russia’s invasion of Ukraine and the subsequent economic blockade have added to that.

As the economic influence of the world’s richest nations wanes, BRICS is expanding. It began as an acronym coined by Goldman Sachs economist Jim O’Neill, in a paper he wrote in 2001, titled ‘Building Better Global Economic BRICs.’ O’Neill was referring to the four new emerging economies from the standpoint of their capital markets, but the acronym soon took concrete shape as an organisation for loose economic cooperation between the four nations on O’Neill’s list — Brazil, Russia, India, and China — with South Africa being added in 2010.

Till very recently, BRICS had very little relevance, even for its members. This has changed now with the entry of six countries — Iran, Saudi Arabia, UAE, Argentina, Egypt and Ethiopia. Together, the 11 BRICS nations command 29 per cent of the global GDP measured in current dollars and 37 per cent if measured in PPP (purchasing power parity) dollars. This is far ahead of the combined GDP of the G7. In terms of global exports, the expanded BRICS will control nearly 21 per cent of the global exports, up from the 18 per cent share of the old BRICS. While the addition of the new members has not made much of a difference here, they have dramatically changed BRICS’s share of global oil production, thanks to the entry of Saudi Arabia and Iran. Before the expansion, BRICS controlled about 20 per cent of the global daily crude oil output; now it will control 43 per cent.

There are, reportedly, some 40 countries waiting in the wings to join BRICS. This is not because they consider it to be an alternative to G7 or G20. The real reason is that the developed capitalist world is declining fast, and everyone wants to hedge against the possibility of being on the wrong side of history. BRICS is a doorway to the independent economic empire that China is building in the Global South. It is an acknowledgment that even long-time allies of the US, such as Saudi Arabia, recognise the need to deal with Chinese capital and imperialism as it expands its global footprint through various infrastructure projects and economic treaties.

This is both bad and good for India. Our role in BRICS is likely to gradually diminish, as the China-Russia duo tries to take over how it functions. However, that also means that western capital needs India as a key ally. Not only because we are in China’s backyard, but also because we are the most populous country in the world, and also have a very big, albeit unequal, economy. Just as the US once propped up South Korea as an economic power to act as its ally in an increasingly hostile region of Asia, India today is perfectly positioned to get support from the Global North.

This is most likely the real reason why Chinese President Xi Jinping has skipped the G20 summit in New Delhi. It is effectively a recognition by Beijing that India’s voice is likely to be much more acceptable to the powerful members of the G20 than that of China. China developed into an economic powerhouse by becoming the factory for the developed capitalist world. In a sense, the entire developed world acted like Dr Frankenstein and created the Chinese economic monster, as western capital sought higher profits, lower domestic wages and low inflation. Now they are trying to reverse this by placing curbs on trade with China. What was once considered India’s missed opportunity could well become a boon as the West backs us to fight the Dragon.

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