BRICS Current Affairs

Cabinet approves pacts signed by Exim Bank under BRICS mechanism

The Cabinet has approved signing of Interbank Local Currency Credit Line Agreement and Cooperation Memorandum relating to Credit Ratings by Exim Bank with member banks under BRICS Interbank Cooperation Mechanism. These agreements were highlighted in BRICS Leaders Xiamen Declaration adopted in Xiamen, China in September 2017.

Cabinet has authorized Board of Directors of Exim Bank to negotiate and conclude any individual contracts and commitments within their framework as both agreements are non-binding in nature.

Significance of Agreements

They will promote multilateral interaction within area of mutual interest which will deepen political and economic relations with BRICS nations. It will position Exim Bank in international platform along with large development finance institutions of BRICS member countries.

They will enable Exim Bank to leverage these agreements and can enter into bilateral agreement with any of these member institutions to raise resources for its business. It will enable lending in single currency by any two member institutions.

Exim Bank

Exim Bank finances, facilitates and promotes India’s international trade. It provides competitive finance at various stages of business cycle covering import of technology, export production, export product development and export credit at pre-shipment and post-shipment stages and investments overseas. It raises resources in off-shore market in diverse currencies and swaps to mitigate the risk.

Cooperation Memorandum Relating to Credit Ratings

It enables sharing of credit ratings amongst BRICS member banks, based on request received from another bank. It serves as ideal mechanism to mitigate credit risks associated with cross-border financing. It can also serve as pre-cursor to proposal of having an alternate rating agency by BRICS nations.

Interbank Local Currency Credit Line Agreement

It is a framework mechanism to extend credit lines in local currencies to the BRICS’ Interbank Cooperation Mechanism (ICM) members. The initial Master Agreement on Extending Credit Facility in Local Currency under BRICS ICM had validity of five years and expired in March 2017. Under it some member banks of BRICS had entered into bilateral agreements for local currency financing under Master Agreement signed in 2012.

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9th BRICS summit held in Xiamen, China

The 9th BRICS summit was held in Xiamen, China. The theme of the summit was “Stronger Partnership for brighter Future”. It was for second time the summit was hosted in China after 2011 summit. At the end of summit, BRICS leaders adopted Xiamen declaration.

Four documents were signed in presence of BRICS Leaders. They are

  • Strategic Framework of BRICS Customs Cooperation
  • BRICS Action Plan for Innovation Cooperation(2017-2020)
  • BRICS Action Agenda on Economic and Trade Cooperation
  • MoU between  BRICS Business Council and New Development Bank on Strategic Cooperation

Features of Xiamen declaration

Strive towards broad partnerships: BRICS countries agreed to strive towards broad partnerships with emerging markets and developing countries and pursue equal-footed and flexible practices and initiatives for dialogue and cooperation with non-BRICS countries, including through BRICS Plus cooperation (It includes Thailand, Tajikistan, Egypt, Kenya and Mexico).

BRICS local currency bond markets: Member countries resolved to promote development of BRICS local currency bond markets and agreed to jointly establish a BRICS local currency bond fund and facilitate financial market integration. They will also encourage explorations toward the establishment of the BRICS Institute of Future Networks.

R&D and innovation in ITC: They agreed to enhance joint research, development and innovation in information and communications technology (ICT), including internet of things (IoT), big data, data analytics, cloud computing, nanotechnology, artificial intelligence, 5G and their innovative applications.

Cooperation on energy: They agreed to strengthen BRICS cooperation on energy and work to foster open, flexible and transparent markets for energy commodities and technologies.

Promote effective use of fossil fuels: They also agreed to work together to promote most effective use of fossil fuels and wider use of gas, hydro and nuclear power to move towards low emission economy, better energy access and sustainable development.

BRICS Agriculture Research Platform: It is proposed to be established in India which will serve as virtual network facilitating cooperation in priority areas.

Broad counterterrorism coalition: They called upon international community to establish genuinely broad counterterrorism coalition and support UN’s central coordinating role in this regard.

People-to-People exchanges: It should be promoted for development and enhancing mutual understanding, friendship and cooperation among BRICS countries.

BRICS

BRICS is acronym for an association of five major emerging national economies viz, Brazil, Russia, India, China and South Africa. It was established in 2009. Originally it was known as BRIC before inclusion of South Africa in 2011. The first formal summit was held in Yekaterinburg, Russia in 2009.

BRICS countries are distinguished by their large, fast-growing economies and significant influence on regional and global affairs. They are home to 42% of the world’s population. Their total share in the global economy has risen from 12% to 23%  in the past decade and collectively contribute they more than half of global growth.

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