What does inclusive growth advocated by the BRICS mean?

The inclusive growth of the BRICS could allow emerging countries and their populations to make the most of the global economy. Such ambition goes beyond the redistribution of wealth; however, the commitments adopted in New Delhi remain difficult to measure.

In brief

• The BRICS place inclusive growth at the heart of their economic strategy.
• The bloc aims to better integrate emerging countries into the global economy.
• The New Development Bank finances infrastructure and sustainable development.
• Members wish to strengthen the use of national currencies in their exchanges.
• The BRICS demand better representation in global economic governance.

Growth that includes more populations

The leaders of the BRICS alliance have placed "inclusive global economic growth" at the center of their summit on September 12 and 13 in New Delhi. This concept starts from a simple observation. An increase in gross domestic product may not immediately guarantee an improvement in the standard of living for the entire population.

Growth thus becomes inclusive when many people participate directly in value creation. It relies on productive employment, education, health, access to credit, and the presence of sufficiently developed infrastructure.

Multiple elements help to understand this approach:

• Created jobs must offer sustainable incomes;
• Small businesses must have easier access to financing;
• Disadvantaged populations must benefit from public services;
• Remote areas must benefit from infrastructure;
• Growth should not rely on a few sectors or social groups.

Narendra Modi stated:

We have tried to promote inclusive global growth.

This is not a notion invented by the BRICS. The World Bank and other international organizations have been using it since the 2000s. They simultaneously assess the pace of growth and how its benefits are distributed.

The BRICS extend the principle to relations between states

Now, the alliance transposes this logic on a global scale. An inclusive international economy should not exclusively produce more wealth. It must offer more countries the opportunity to join high-value-added activities and participate in rule-making.

Thus, the BRICS demand better access to technologies, financing, and global production chains. They request that emerging countries do not remain mere suppliers of raw materials or cheap labor.

Such a claim also concerns global governance. Thus, the New Delhi Declaration calls for significant representation of developing economies in the International Monetary Fund and the World Bank.

The BRICS bloc constitutes about half of the world's population, nearly 40% of GDP, and more than a quarter of international trade, according to data provided by the Indian presidency. Its weight consolidates its demand for reform of institutions established at the end of World War II.

The BRICS Bank must finance this ambition

The New Development Bank represents the main financial instrument of the bloc. Founded in 2015, it finances infrastructure, energy projects, transportation, water networks, and various sustainable development programs.

By the end of June, the institution had approved 141 projects for a cumulative sum of $44 billion. This amount represents an average of nearly $312 million per project. Nevertheless, it remains modest compared to the financing needs of the eleven member countries.

The BRICS countries also want to develop the use of national currencies in trade and investment. Their goal is to reduce transaction costs and their dependence on dollar-dominated circuits.

However, the summit did not create any common currency. The authorities of the bloc prefer the interconnection of existing payment systems. Such a method takes into account the differences between monetary policies and avoids the automatic creation of a supranational central bank.

This declaration also supports open multilateral trade based on the rules of the World Trade Organization. At the same time, it denounces unilateral sanctions and trade barriers that are incompatible with these rules.

Internal Divergences Limit Results

First, the inclusive growth of BRICS faces the imbalances present within the group. Indeed, China has an industrial and financial power that is significantly superior to that of several partners. India, in particular, recorded a trade deficit of $112 billion with Beijing.

Member countries do not share the same geopolitical interests either. Some have close relations with the United States, while Russia and Iran face significant Western sanctions. Such stances complicate the adoption of common financial mechanisms.

In New Delhi, the obtained declaration reveals, however, that the bloc can reach a compromise. The leaders defended multilateralism. They called for maximum restraint in the Middle East, despite disagreements between Iran and the United Arab Emirates.

Now, the main test may come from the implementation of commitments. The financing volumes of the New Development Bank, the role of local currencies, and the actual access of companies to value chains will allow for an assessment of whether this inclusive growth surpasses diplomatic rhetoric.