BRICS bank,$100 billion contingency fund get nod

Also,the summit cleared the creation of a $100 billion CRA to serve as a cushion or back-up for BRICS countries in the event of a economic crisis. “We are of the view that the establishment of the CRA with an initial size of $100 billion is feasible and desirable subject to internal legal frameworks and appropriate safeguards. We direct our finance ministers and central bank governors to continue working towards its establishment,” the declaration said.

Later,finance minister P Chidambaram said China will be the largest contributor with $41 billion while India,Russia and Brazil will pledge $18 billion each. South Africa will pledge $5billion.

However,these amounts will just remain as a commitment and will be required only if there is a crisis. “This is just a precautionary measure as we don’t expect a crisis in any of these countries,” said Chidambaram.

The leaders,however,failed to reach an understanding on the capitalisation of the new bank with China insisting on a $100 billion corpus while countries such as India were more comfortable with $50 billion. Linked to this were issues of voting rights that are established on the basis of the financial contribution of each country. By that yardstick,China would emerge with the most votes.

India,which had mooted the idea first,was willing to keep it between $50 billion and $100 billion but the larger view was to have a more detailed discussion. So,the finance ministers have been asked to resolve these issues over capitalisation,governance and distribution by next year,Chidambaram said.

The summit also approved the creation of a joint business council with five representatives each from every country’s industry. Given the interest among businesses to explore commercial ties among BRICS countries,the leaders hoped this council would provide a structured platform.

SUMMIT HIGHLIGHTS

* The summit declaration signed by the five heads of government states that the establishment of a new development bank is feasible and viable

* The CRA would serve as a cushion for the BRICS countries in the event of an economic crisis

* The amounts pledged towards the CRA would remain as a commitment and would be required only in the event of a crisis

* The BRICS leaders could not reach an understanding on the capitalisation of the new bank,due to the issue of voting rights

* The summit also approved the creation of a joint business council with five representatives from each country’s industry

BRICS grow in global strength

Leaders of the BRICS group of powerful emerging economies meet on Tuesday and Wednesday in the South African city of Durban. The main objective of the heads of state of Brazil,Russia,India,China and South Africa is to establish a development bank to balance the influence of the World Bank and International Monetary Fund,as well as creating a joint foreign exchange reserve.

A few facts about the grouping

* The BRICS countries make up 21 per cent of global GDP. Their share of global GDP has risen threefold in the past 15 years.

* The BRICS are home to 43 per cent of the world’s population.

* The BRICS countries have combined foreign reserves of an estimated $4.4 trillion.

* Intra-BRICS trade flows reached $282 billion in 2012 and are estimated to reach $500 billion by 2015. In 2002,it was $27.3 billion.

* IMF estimates of GDP er member in 2012,China $8.25 trillion,Brazil $2.43 trillion,Russia and India at $1.95 trillion each,South Africa $390.9 billion.

* Per capita GDP for 2012 was estimated at,China $6,094,Brazil $12,340,Russia $13,765,India $1,592,South Africa $7,636

* Jim O’Neill,chairman of Goldman Sachs Asset Management,coined the BRIC concept in 2001.

* South Africa was admitted by the other BRIC leaders in December 2010,adding the “S” to the original grouping.