Highlighting the increase in African nation's trade with India, President Jacob Zuma has asked the BRICS members to use the bloc's Business Council as a platform to explore new models and approaches towards more equitable development and inclusive growth in the world.

Opening the Council meeting yesterday, President Jacob Zuma highlighted that total trade with India, which is South Africa's sixth largest trading partner, grew substantially from R53 billion (USD 5.23 billion) in 2011 to R67 billion (USD 6.61 billion) in 2012, representing a growth of over 26 per cent.

Speaking at the inaugural BRICS (Brazil, Russia, India, China and South Africa) Business Council meeting, Zuma said the strength of the alliance was amplified by the fact that BRICS countries accounted for 43 per cent of the world's population.

Zuma said there was potential within the group, adding that business leaders should take advantage of opportunities present and urged business to advance key issues in the BRICS economies.

"Within South Africa, there is a host of opportunities as well. We invite participation in six areas, which are infrastructure development, agriculture, mining and beneficiation, manufacturing, the green economy and tourism," the African country's government news agency quoted Zuma as saying.

Indian participants in the meeting welcomed the agreement between the five nations to forge a closer partnership for development integration and industrialisation to contribute to the development of the African continent.

"It was a very positive meeting because we could between the five countries develop a consensus of partnership and how BRICS countries can contribute towards the growth of Africa from the perspective of industrialisation, beneficiation and added value to Africa," Ambika Sharma, Deputy Secretary General and Head of International at the Federation of Indian Chambers of Commerce and Industry (FICCI) told PTI.

Key recommendations of the Council included working collectively to carry forward the work agenda set by the G20 leaders for promoting stronger, sustainable and more equitable growth.

"We should look to continue enhancing intra-BRICS trade to achieve at least USD 500 billion by 2015 as per agreement from previous Business Forum in India," the Council said in a statement.

Sharma said FICCI members were taking development in Africa very seriously.

Although a number of Indian companies have already established footprints in Africa, Sharma said FICCI would now look at newer companies that wanted to expand abroad.

Indian High Commissioner Virendra Gupta said it was most significant that South Africa had also invited business leaders from other African countries to the meet.

Highlighting the increase in African nation's trade with India, President Jacob Zuma has asked the BRICS members to use the bloc's Business Council as a platform to explore new models and approaches towards more equitable development and inclusive growth in the world.

Opening the Council meeting yesterday, President Jacob Zuma highlighted that total trade with India, which is South Africa's sixth largest trading partner, grew substantially from R53 billion (USD 5.23 billion) in 2011 to R67 billion (USD 6.61 billion) in 2012, representing a growth of over 26 per cent.

Speaking at the inaugural BRICS (Brazil, Russia, India, China and South Africa) Business Council meeting, Zuma said the strength of the alliance was amplified by the fact that BRICS countries accounted for 43 per cent of the world's population.

Zuma said there was potential within the group, adding that business leaders should take advantage of opportunities present and urged business to advance key issues in the BRICS economies.

"Within South Africa, there is a host of opportunities as well. We invite participation in six areas, which are infrastructure development, agriculture, mining and beneficiation, manufacturing, the green economy and tourism," the African country's government news agency quoted Zuma as saying.

Indian participants in the meeting welcomed the agreement between the five nations to forge a closer partnership for development integration and industrialisation to contribute to the development of the African continent.

"It was a very positive meeting because we could between the five countries develop a consensus of partnership and how BRICS countries can contribute towards the growth of Africa from the perspective of industrialisation, beneficiation and added value to Africa," Ambika Sharma, Deputy Secretary General and Head of International at the Federation of Indian Chambers of Commerce and Industry (FICCI) told PTI.

Key recommendations of the Council included working collectively to carry forward the work agenda set by the G20 leaders for promoting stronger, sustainable and more equitable growth.

"We should look to continue enhancing intra-BRICS trade to achieve at least USD 500 billion by 2015 as per agreement from previous Business Forum in India," the Council said in a statement.

Sharma said FICCI members were taking development in Africa very seriously.

Although a number of Indian companies have already established footprints in Africa, Sharma said FICCI would now look at newer companies that wanted to expand abroad.

Indian High Commissioner Virendra Gupta said it was most significant that South Africa had also invited business leaders from other African countries to the meet.

Warning that the Indian economy is yet to show signs of recovery, Asian Development Bank (ADB) president Haruhiko Kuroda advocated improvement in investment climate, upgrade of services and removal of trade barriers to lift the growth rate.

“For India, we project economic growth in fiscal year 2012 to slow to 5.4% before picking up to 6.5% in 2013. Unlike China, which has shown clear signs of stabilisation from the second half of last year, there is no clear evidence yet of growth recovery in India,” Kuroda said at a FICCI conference on Thursday.

The delay in implementing necessary reforms is one of the major factors that is hampering India’s competitiveness. “But we expect that recent government reforms will help steer the economy back to strong growth. What is challenging is that these reforms must also make growth more inclusive,” he said.

While forecasting that the global economic slowdown will continue to be a “serious drag” on Asian economies, particularly India and China, he said the slowdown in India was mainly due to a slowdown in investment – fixed capital formation was up by only 2.3% in the first half of fiscal 2012against 9% in the same period of the previous fiscal. “Consumption in both economies is also stagnating,” he added.

The need is to dramatically expand the sources and volume of available infrastructure financing, he said, adding this will not be possible without private sector participation. Considering India’s young and growing labour force, the service sector needs to create more jobs for the millions who will join the workforce every year.

The devastating slowdown in the European economies has shown that 'decoupling' – the idea that developing nations would go on growing despite problems in the west – is a myth

Sitting in an office cluttered with assorted Hindu deities, tea exporter Anurag Gupta does not look like a man too worried about the nosediving rupee. On Friday, the Indian currency plunged to a record low against the dollar, prompting worries about a further slowdown in the once dynamic economy. But Gupta sells his luxury tea to countries such as the US and the UK, and for now, he's reaping the benefits of a cheaper currency.

"At the start of the week, there were 55 rupees to the dollar; today, there are 57," he says, smiling. A box containing 10 of his Sunshine Tea Sticks (a patented twist on a conventional teabag) wholesale at $2.50, so the more rupees in the dollar, the bigger his profit margins.

Nevertheless, Gupta is expecting hard times ahead. "The recession has not hit us yet, but it is around the corner," he says, the orange bindi on his forehead crinkling as his brow furrows. "We see the turmoil in Greece and the crisis in Europe, and need to prepare for that to affect us," he says, adding that he is considering lowering his prices as a pre-emptive move.

Currently, Gupta sells 100,000 boxes a month, almost all overseas. He hopes the high-end market he targets will be recession-proof: any Americans who can afford to pay $8 for 10 teabags are, he believes, not the demographic worst hit by the global financial crisis.

After the Lehman Brothers collapse in 2008, demand for his tea sticks did dwindle, he concedes, but it bounced back. And, anyway, he is not overly concerned about the foreign market when there is so much potential at home.

There was an outcry earlier this month when the latest data showed the Indian economy had expanded just 5.3% in the three months to March, the slowest pace in nine years – but Gupta insists this is still a country on the up.

"Just a few years ago, no Indian would imagine going to spend 50 or 60 rupees on a cup of tea or coffee," he says. "But with Costa Coffee and other chains opening up, Indians are prepared to spend that and more." Currently, less than 5% of Sunshine Tea's sales are domestic, concentrated in luxury Indian hotels and food stores.

Plunging demand from the markets of Europe, many of which remain deep in recession, and collapsing global confidence in politicians' ability to stop the rot, has ruthlessly exposed the weaknesses of emerging markets – including the so-called Brics of Brazil, Russia, India and China.

Rakesh Shah, co-chairman of the foreign trade committee of the Federation of Indian Chambers of Commerce and Industry, says exporters whose customers are primarily in the eurozone have already been hit. "I know of many small textile exporters who sold clothes to Europe which have already closed down as a direct result," he reports. He says figures show Indian exports were down 3% between May 2011 and May 2012 – "particularly problematic when you consider the target was for 15%-20% growth".

But businesses that rely on imports are those which, arguably, are suffering the most, he adds, giving as an example the Indian gem and jewellery industry, which relies on importing precious stones and gold from abroad. "These raw materials cost 20% more now than they did a year ago."

With the economy slowing sharply, and the rupee plunging as investors take flight and head for the safety of the US dollar, the Indian authorities are wrestling with a dilemma: if they cut interest rates to kickstart growth in the face of the eurozone crisis, they risk unleashing inflation, which is already running at 10%, making life hard for ordinary families struggling to afford essentials. "In a nation of 1.2 billion people, a government can fall on inflation," says Shah.

India has domestic problems of its own – much of its public infrastructure remains in a parlous state, and businesses complain of being hamstrung by corruption and bureaucracy.

But like its fellow Brics, India is also facing up to a new world in which demand from the rich west is likely to be weak for a prolonged period – and as a result, these countries are unlikely to maintain the rampant growth rates of the past decade.

Consumer goods giant Procter & Gamble told an investor conference last week that it would focus its attention on its core markets, including the US and UK, admitting that it had devoted too much of its resources to emerging economies. "We will continue to expand our developing market portfolio, but we will do it on a more balanced pace," said P&G's chief executive, Bob McDonald.

As in 2008, when the sub-prime crisis was raging, many experts began 2012 pinning their hopes on a "decoupling" of the tired economies of the old world and the rampaging Asian tigers of China and India. But just like last time, when the collapse of Lehman Brothers helped to prompt a worldwide recession, the slowdown in the eurozone has had knock-on effects thousands of miles away.

Neil Shearing of Capital Economics says: "Decoupling is a bit of a myth: you either believe in globalisation, or you believe in decoupling. The eurozone looks like it's sliding into recession, and that's bound to have an impact. It's just a natural function of greater trade and capital integration."

He adds that each of the major emerging economies also has its own specific problems to deal with. China's growth has been extremely investment-dependent in recent years, and became even more so after Beijing unleashed a spending spree in 2008-09 to offset the downturn in the rest of the world.

Total investment was an extraordinary 49% of Chinese GDP in 2010-11. High investment levels are not unusual in rapidly developing economies, but few analysts believe China can keep building roads, airports and high-rise apartments at such a stunning pace. Many fear there has been an unsustainable building bubble that is about to pop.

"The big problem is that their recovery programme concentrated on this gigantic investment surge," says Charles Dumas of consultancy Lombard Street Research. Growth this year is expected to be closer to 8% than the 10% that has been the norm over the past 10 years.

There is also a deliberate effort by the Chinese authorities to shift the balance towards domestic consumption and away from exports. "It's not just about growth, it's about the structure of growth," says Shearing.

Commodity prices, including the cost of oil, have already begun to decline on world markets as a response to fears that China's apparently insatiable appetite for raw materials could start to slow – just as growth also declines in the rich world as a result of austerity and financial turmoil.

That could create problems for Brazil, which is heavily dependent on trade with China – now its largest export market, having been hoovering up raw materials such as iron ore and copper. One recent estimate suggested 8% of the world's entire production of copper was going into buildings in China.

Brazil also has its own domestic worries – it has experienced a rampant property boom in recent years, with house prices in Rio trebling since 2008, and mortgage borrowing soaring, and that raises the spectre of a potential crash. Shearing says: "They've had a credit boom, which has left some households looking overstretched."

Kevin Dunning, global economist at the Economist Intelligence Unit, warns that Brazilian growth could slow dramatically this year, to 2.2% – a rate more familiar in developed western economies.

In the medium term, most analysts expect the radical shift of economic power from the west to the emerging markets to continue, and India and China to lift millions more out of poverty. But the decision by China and India last week to contribute tens of billions of dollars to the International Monetary Fund's war chest for tackling the eurozone crisis underlined how nervous they are about their own vulnerability. As Europe and the US turn inwards to tackle their own crises, it could be a tough couple of years for the Brics.

For Gupta, the answer may be to target the growing middle-class at home – and expand beyond his traditional customers in the west, turning instead to India's emerging market rivals. "We've just sent some tea samples to China," he grins.

Concerned over the impact of the Euro zone crisis on world trade, BRICS countries on Wednesday called for greater policy co-ordination and enhanced trade and investment to boost growth.

With intra-BRICS trade currently at around $230 billion (at an average annual growth rate of 28 per cent), the BRICS Trade Ministers sought measures to take it to $500 billion by 2015.

The five emerging economies (Brazil, Russia, India, China and South Africa) are also in talks to set up a BRICS Development Bank.

The BRICS Summit on Thursday is expected to see the signing of a framework agreement on extending credit facilities in the respective local currencies and multi-lateral letter of credit confirmation to facilitate intra-BRICS trade.

The Commerce, Industry and Textiles Minister, Mr Anand Sharma, noted a decline in demand in Europe and said, “Now is the time to focus on setting new intra-BRICS trade and investment targets to ensure easy flow of capital, knowledge and information.”

He said BRICS nations will be defining the new global architecture, given their strengths and complementarities and huge reserves of natural resources. Mr Sharma was speaking at a BRICS Business Forum meeting organised by industry bodies FICCI, CII and Assocham.

Terming the recent decline in India's GDP growth as “disturbing”, Mr Sharma said “With enhanced economic engagement with BRICS, we will be able to overcome and move to a growth trajectory of 7.5-8 per cent soon.”

Rising prices
Observing that the Chinese economic growth had slowed down due to the rising prices of labour and raw materials, its Commerce Minister, Mr Chen Deming, said China was keen to develop ties with its BRICS counterparts.

He said in the next five years China was expected to import $10 trillion worth of goods, adding that it was looking to buy more from India, Brazil and South Africa.

The Ministers emphasised the need to resist protectionist tendencies to promote international trade.

BRICS countries also decided to enhance cooperation on customs; trade facilitation; investment promotion; small and medium enterprises collaboration; trade data collection and harmonisation; e-commerce; and protection of intellectual property rights.

Voicing concern at the current impasse in the WTO's Doha Development Round, the Ministers said they were fully committed to early conclusion of negotiations based on the progress made in the Round since 2001.

The Ministers agreed to coordinate their positions at the WTO and in other multilateral fora such as the forthcoming meeting of the G20 Trade Ministers.

Along with discussing the world economy and other general issues, the BRICS leadership should focus on enhancing intra-BRICS trade and sharing know-how

This will be an eventful week for India, as New Delhi will be hosting the BRICS Leaders’ Summit and the BRICS Business Forum. While there are many emerging-economy groups in the world, there are few that have attracted the kind of attention BRICS has. Admittedly, this is not a group bound by security concerns. It is also not a group aligned on the basis of some commodity exports. This group, whose members span continents, is a manifestation of the shift seen in global economic power. It also underlines the desire of the fast-growing developing countries to collectively define the global agenda on issues that have a direct bearing on them.

So, as the official and business delegations from Brazil, Russia, China and South Africa descend on New Delhi, there will be a lot of interest with which people from all over will follow the ensuing deliberations. There are many areas, such as the state of the global economy, geo-political developments in the Middle East, governance reforms in multilateral institutions and nomination of a candidate for the next World Bank president, that are likely to come up for discussion at the political summit. The focus at the business forum will be on how to promote greater economic engagement. Of course, ideas generated at the business forum would flow into the political summit for consideration by the leaders when they discuss commercial relations.

Greater economic engagement is the cornerstone of relations amongst countries and it is time that the BRICS nations take a serious look at how economic relations can be strengthened. And, in my view, there are several areas that can be looked at.

Let us for a moment look at the trade figures. Numbers show that the global trade of BRICS countries together is of the order of about $4.7 trillion. This represents close to 16% of the world total. However, intra-BRICS trade is just about $230 billion. This certainly defies potential.

Each country belonging to BRICS has its own strength areas. Brazil is an agricultural power-house and a large producer of several commodities. Russia holds one of the largest reserves of oil and gas in the world. India has acknowledged strengths in the services sector. China is a manufacturing superpower and has emerged as the largest exporter of goods. South Africa is home to huge mineral reserves. With such diverse areas of strength, each country can support the other and take part in each other’s respective growth and development programmes.

Therefore, as a starting point, BRICS nations should aim towards at least doubling intra-BRICS trade to $500 billion in the next few years. Moving in this direction is important because, in the days ahead, the West will no longer be able to offer the kind of demand it has for so long for our exports. When we are in any case looking at alternate markets and trying to diversify export destinations, one obvious choice is to trade more amongst ourselves.

Here, it is important to take note of the proposal to promote trade amongst the BRICS countries in local currencies. This idea of currency convertibility, if managed properly, can be a game changer and offer a natural boost to intra-BRICS trade.

While increasing trade is of paramount importance, there are several other areas where fruitful opportunities for cooperation exist. Let me highlight a few.

First is the energy sector. Both in Brazil and South Africa, there is a move to shift from non-renewables to renewables with particular emphasis on wind and solar power. India and China have similar programmes and can also offer high quality wind and solar power equipment. Russia can share its expertise with others for improving productivity in matured oil and gas fields. It can also share its experience on underground coal gasification. Further, as use of biofuels is on the rise, exchanging knowledge on related technologies can be an important component of cooperation in the energy sector.

Regarding agriculture, ensuring food security is a key public policy objective in all countries. And one of the ways BRICS nations can support each other is by sharing best practices that have led to improvement in crop productivity. If Brazil is the world leader in sugarcane, China has done very well in hybrid rice. Such experience must be shared. Co-developing climate change resistant crop varieties must also be considered.

Providing affordable medicines to people is a priority in all countries. The BRICS nations have also agreed to promote exports of vaccines for diseases such as HIV/AIDS, Malaria, TB, etc, to other developing countries. Pharma companies from these countries should come together and endeavour to support their governments in this objective. Be it early-stage discovery work or clinical trials, companies must look at all avenues for cooperation.

In the infrastructure sector, the financing requirements for infrastructure development are huge and countries are using innovative ways to raise funds. Experience-sharing among BRICS nations in this regard as well as in promoting public private partnership will prove to be useful. Further, by having a BRICS Development Bank—as is being considered—we can promote projects in areas such as water, waste management, low-cost housing and mass transportation, which align with our development priorities.

The points I have mentioned above are only indicative. There is much more BRICS nations can do together. The dialogue at New Delhi will reflect this and set the agenda for us to follow.

The author is president, FICCI