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15 July, 2014

Modi on a business trip

BRP Bhaskar
Gulf Today

Prime Minister Narendra Modi is making his debut on the world stage. The occasion is the annual summit of BRICS, a grouping of five emerging economies from different continents, being held in Brazil today and tomorrow.

Together the five countries — Brazil, Russia, India, China and South Africa — have a GDP of $24 trillion and hold 40 per cent of the world’s population.

This year’s summit assumes special significance as BRICS is expected to announce its plan to set up a Development Bank, which some see it as a potential rival to the World Bank. The creation of a Contingent Reserve Arrangement is another positive outcome expected from it.

This is not Modi’s first trip abroad as prime minister. Although many big countries extended invitations to him when he led his Bharatiya Janata Party to a resounding victory in the elections, he chose the small landlocked Himalayan kingdom of Bhutan for his first official visit.

The BRICS summit gives him an opportunity to interact with not only leaders of India’s partners in that group but also leaders of 11 Latin American countries whom Brazil’s President Dulma Rouseff has invited to meet her guests.  

The Development Bank, conceived as a financial safety net, was mooted by India at the 2012 summit it hosted. China and Russia immediately welcomed it. It is expected to have an initial capital of $50 million, with the five founding nations contributing $10 million each.

China, the most affluent of the five countries, wants BRICS to evolve into a strategic cooperative mechanism. It is ready to put into more money the Development Bank but the others have reservations arising from the experience of the World Bank which the US controls by virtue of its large contribution to its capital.

Until now BRICS has functioned without a headquarters. There is a proposal to set up one, and several countries have come forward to host the headquarters and the development bank. A formula for smooth resolution of these issues was already in sight when Modi took off from New Delhi.

BRICS’ importance as an economic forum will increase if Russia’s proposal to establish an association to guarantee energy security to its members and undertake integrated research and analysis of global markets goes through. But, then, a multilateral forum must necessarily confront political issues too, and Modi’s interactions with Chinese President Xi Jinping and Russian President are important in this context.

The only ministerial colleague Modi has taken with him is Nirmala Sitharaman, who is in charge of Commerce and Industry. Her presence indicates that he sees this trip primarily as a business opportunity, although the Ukraine and Palestine developments and restructuring of the UN Security Council and international financial institutions are expected to figure in the discussions.

The officials accompanying Modi include National Security Adviser Ajit Doval. A former Intelligence officer, he is now playing a key role in foreign policy issues.

The planned bilateral meetings with some Latin American leaders give Modi an opportunity to explore possibilities of expanding trade with the region, which has a combined population of 600 million and GDP of $4.9 trillion. Last year trade with the region was $42 billion. Officials believe it can be pushed up to $100 billion.

This is not Modi’s first business trip abroad. When the United States and Europe were unwilling to let him in on account of the riots that occurred in Gujarat while he was Chief Minister, he had visited China four times and secured several investment offers.

A post which appeared on his website after the 2011 visit said, “Chinese, being diligent to the core, having seen all round development and spectacular growth of Gujarat, and the leadership provided by Narendra Modi, wants to build a strong and enduring relationship with Gujarat.”

Since becoming the prime minister, he has talked of making India a global manufacturing centre like China. In Brazil, he may, in a sense, be in competition with President Xi, who also has business on his mind and has scheduled state visits to Brazil, Argentina, Venezuela and Cuba after the summit. However, both leaders are of the view that there is enough room for both countries to grow.

Xi and Modi, who are both at the beginning of their tenure, are expected to exchange visits within a year. Their ability to work together will have a bearing on the course of events in this region and beyond in the immediate future.-- Gulf Today, July 15, 2014

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