BRICS – Significance & Challenges – Explained Pointwise

The 18th BRICS Summit, being hosted by India in New Delhi, brings together the expanded BRICS membership amid growing geopolitical and economic uncertainties. Under India’s theme of “Building for Resilience, Innovation, Cooperation and Sustainability,” the summit seeks to strengthen Global South cooperation and promote a more inclusive global order.
India sees BRICS as a vital platform for bringing inclusive multilateralism especially when the global institutions are facing a crisis of legitimacy & representation. Thus, it is important for us to examine the significance of the group & the challenges that it is facing presently.

What is BRICS?

• BRICS is an intergovernmental organization comprising 11 countries – Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia & the United Arab Emirates.
• The term BRIC was originally coined by Jim O’Neil in 2001 to designate the group of emerging markets.
• The first summit took place in 2009 featured the founding countries of Brazil, Russia, India, and China, where they adopted the acronym BRIC and formed an informal diplomatic club where their governments could meet annually at formal summits and coordinate multilateral policies. In 2010, South Africa was admitted & the organisation adopted the name BRICS.
• The acronym BRICS+ has been informally used to reflect new membership since 2024.
• Originally, the group was formed to counterbalance the dominance of Western-led institutions like the G7, the International Monetary Fund (IMF), and the World Bank, BRICS advocates for a multipolar world order and increased representation for the Global South.

Origin & Evolution:

What are the OBJECTIVES of BRICS?

1. Promote Economic Cooperation: BRICS seeks to deepen economic ties among member countries by increasing intra-BRICS trade and investment, facilitating business cooperation, promoting infrastructure and development financing, and strengthening coordination on global economic issues. It also encourages greater use of local currencies and alternative payment mechanisms to reduce transaction costs and vulnerability to external financial shocks. 
2. Reform Global Governance: BRICS act as a pressure group for a more inclusive, equitable, and representative multipolar international system. This includes pushing for reforms in international financial institutions like the World Bank and IMF, and the United Nations Security Council, to better reflect the interests of emerging economies and developing countries.
3. Strengthen Global South Cooperation: BRICS provides a platform for emerging markets and developing countries (also known as Global South) to assert their influence on the international stage and address common challenges like climate finance, sustainable development, and access to technology.
4. Reduce Reliance on Western Institutions and Currencies: Explore alternative mechanisms for trade and finance, including increasing trade in local currencies and developing their own financial institutions, to reduce dependence on the U.S. dollar and Western-dominated financial systems. 
5. Support Infrastructure & Development: BRICS promotes infrastructure financing in developing countries through the New Development Bank (NDB), which funds projects in areas such as transport, renewable energy, water & sanitation, urban infrastructure and digital connectivity. This helps address infrastructure gaps and supports sustainable and inclusive economic growth.
6. Cooperate on Global Challenges: BRICS provides a platform for member countries to coordinate their positions and undertake joint action on major global challenges such as climate change, pandemics, terrorism, food and energy insecurity, and sustainable development.

What are the KEY INITIATIVES of BRICS?

1. Alternative financial systems:
   1. New Development Bank (NDB): Finances infrastructure and sustainable-development projects in member and other developing countries. It provides an alternative source of development finance alongside institutions such as the World Bank.
   2. Contingent Reserve Arrangement (CRA): CRA is a $100 billion financial safety mechanism designed to provide liquidity support to BRICS members facing balance-of-payments pressures and short-term external financial difficulties.
   3. Local Currencies Trade Settlement and De-dollarization: A proposal to introduce BRICS-PAY which aims to create a shared cross-border payment platform that would link national fast-payment networks and potentially support central bank digital currency (CBDC) transfers, facilitating seamless and potentially dollar-free transactions among members.
2. BRICS Business Council: Established in 2013, it promotes business-to-business cooperation, trade, investment and private-sector partnerships among BRICS countries.
3. Global Value Chains (GVC) Action Plan: Frameworks aimed at easing customs procedures, reducing trade tariffs within the bloc, and mapping critical mineral and industrial supply chains to withstand Western market disruptions. 
4. BRICS Anti-Terrorism Strategy:  Members cooperate on counter-terrorism efforts, including intelligence sharing, capacity building, and preventing the financing of terrorism.
5. BRICS Initiative on Denial of Safe Haven to Corruption: Aims to improve anti-corruption cooperation and build anti-corruption capabilities through training and education.
6. BRICS Partnership for the Elimination of Socially Determined Diseases: A recent initiative aimed at addressing health challenges disproportionately affecting vulnerable populations.
7. Unilateral Economic Sanctions: BRICS openly condemned such sanctions.

What is the SIGNIFICANCE of BRICS?

1. Economic Influence:
   • Share of Global GDP: On a purchasing power parity basis, BRICS economies accounted for almost 40% of global GDP in 2024, compared to approximately 29% for the G7.
   • Demographic and Trade Footprint: The expanded grouping represents 49.5% of the world’s population and 26% of global trade. Their share of global merchandise exports doubled from 12% to 24% between 2003 and 2024.
   • Intra-BRICS Trade: Trade among members surged more than 13-fold, from $84 billion in 2003 to $1.17 trillion in 2024.  
2. Reforming Global Governance: BRICS advocates for expanding the UN Security Council to include permanent seats for India and Brazil, and pushing for reforms at the IMF and World Bank to reflect current economic realities.
3. Platform for Global South (South-South Cooperation): BRICS has expanded to include more countries from Africa, the Middle East, and Asia, amplifying the voice of developing nations in global affairs and addressing issues like inequality and under-representation in institutions like UNSC.
4. Alternative International Financial Institutions: The creation of institutions like the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA) provides alternative financial mechanisms for development and stability, reducing reliance on Western-dominated bodies and the US dollar.
5. De-dollarization Push: BRICS is working on interoperable digital payment architectures and national-currency trade to reduce reliance on the US dollar, giving member states greater financial autonomy. 
6. Addressing Global Challenges: BRICS provides a forum for members to coordinate positions on critical global and regional security issues, including counter-terrorism, cybersecurity, and peace and stability in various conflict zones. For e.g. 2025 BRICS Summit criticized Pahalgam Terrorist Attack, as well as, bombing of Iran’s nuclear sites by USA. 

What are the CHALLENGES faced by BRICS?

1. Diverse Political Systems and Ideologies: BRICS comprises a mix of democracies (India, Brazil, South Africa, potentially Indonesia, Egypt) and authoritarian states (China, Russia, Iran). This fundamental difference in political systems can lead to divergent approaches on human rights, governance, and international norms, making it challenging to forge a unified stance on all geopolitical issues.
2. China’s Dominance: China’s economy is significantly larger than all other BRICS members combined, creating an imbalance. There are concerns among other members, particularly India, about Beijing’s overwhelming influence and its “predatory” economic practices or debt diplomacy.
3. Varying Economic Structures: Members have different economic structures (e.g. commodity exporters like Russia, Brazil, Saudi Arabia, UAE; manufacturing hubs like China; service and IT hubs like India). This can lead to conflicting trade interests and priorities.
4. Limited Intra-BRICS Trade: Despite BRICS representing a large share of the global economy and population, trade among its members remains below its potential. Differences in tariffs, regulations, standards, logistics, payment systems and geographical distance create barriers to deeper economic integration. India-China trade, for instance, is substantial but marked by a significant trade imbalance.
5. Bilateral Tensions Among Members:  The ongoing border disputes and geopolitical rivalry between India and China are a major underlying tension. The recent expansion has brought in countries with existing regional rivalries (e.g. Saudi Arabia vs. Iran, Egypt vs. Ethiopia over the Nile River). Managing these tensions while fostering cooperation will be a delicate balancing act.
6. “Asian NATO” Label: Western nations, particularly the US, often view BRICS (and especially its expansion) as an attempt to form an “anti-Western” or “anti-American” bloc, akin to an “Asian NATO.” This narrative can lead to increased geopolitical tensions.
7. Russia-West Conflict: The Russia-Ukraine conflict and resulting tensions between Russia and Western countries have created challenges for BRICS by introducing geopolitical divisions within the grouping. Western sanctions on Russia also complicate trade, investment, banking and payment transactions involving BRICS members. Different members have adopted different positions on the conflict, making consensus on major international issues difficult.
8. Tariff Threats and Economic Coercion: Last year, US President Donald Trump’s threatened the BRICS countries to impose tariffs & other economic sanctions if they are perceived to be aligning against Western interests or undermining the US dollar.
9. Informal Structure: BRICS operates as an informal grouping without a binding treaty or a permanent secretariat (beyond the NDB). While this allows flexibility, it can also lead to a lack of institutional coherence and consistent implementation of decisions.
10. Expansion-Related Challenges: The expansion of BRICS has increased its geographical and economic diversity. A larger membership can make consensus-building, coordination and decision-making more complicated.

What can be the WAY FORWARD?

1. Focus on Shared Economic and Development Goals: While political ideologies differ, members generally agree on the need for economic development, poverty alleviation, and sustainable growth. Prioritizing cooperation on these tangible goals (e.g. green infrastructure, digital transformation, food security) can build trust and common ground.
2. Fairer Intra-BRICS Trade: Develop mechanisms to address trade imbalances, particularly with China. This could involve promoting diversification of imports/exports among members, encouraging joint ventures, and investing in less developed BRICS economies.
3. Strengthening the NDB’s Role: The New Development Bank (NDB) must continue to expand its lending in local currencies and prioritize projects that benefit all members, especially the smaller and newer ones, thereby fostering a sense of shared economic benefit and reducing dependence on any single dominant economy within the bloc. 
4. Formalizing Decision-Making: While maintaining its informal nature, BRICS could explore mechanisms to streamline decision-making and ensure commitments are followed through. This could involve a small, dedicated secretariat for coordination beyond annual summits.
5. Manage Expansion Effectively: With a larger membership, BRICS should establish clear membership criteria, decision-making procedures and institutional structures to maintain efficiency and cohesion.
6. Pragmatic Multilateralism Over Anti-Western Rhetoric: BRICS should avoid evolving into an explicitly anti-Western bloc and instead pursue pragmatic, issue-based cooperation. Members have different relationships with the US, EU and other Western institutions; therefore, a confrontational approach could undermine BRICS’ cohesion and global appeal.
7. Strategic De-dollarization: BRICS countries can move towards de-dollarization by introducing certain steps in incremental manner:
   1. Expand Bilateral Trade in Local Currencies: Continue to promote and expand bilateral trade settlement in national currencies among members.
   2. Develop BRICS PAY: Accelerate the development and implementation of the BRICS PAY system and other digital payment platforms to facilitate efficient cross-border transactions in local currencies. 
   3. NDB Lending in Local Currencies: The NDB should continue to prioritize and expand its lending in local currencies, providing a significant boost to their internationalization. 
   4. Explore Basket of Currencies (like R5): The idea of a unit of account based on a basket of BRICS currencies (like the proposed “R5”) could be explored as a precursor to a common currency, serving as a reference point for trade and a potential store of value.

CONCLUSION:
BRICS is an important institution to challenge the western dominated forums & for providing an alternative idea of global governance. By systematically addressing the challenges that it is facing through cooperation, institutional strengthening, and strategic positioning, BRICS can solidify its role as a significant and constructive force in shaping a more inclusive and multipolar global order.