Multilateral Newsletter-July 2015 edition

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The July 2015 edition of the Multilateral Newsletter highlights the importance of India’s engagement in BRICS, the key areas of cooperation and the strategies that can be adopted to deepen the economic and trade relations within the BRICS countries. In addition, the newsletter also covers some of the key happenings and highlights from the reports from the World Bank (WB), Asian Development Bank (ADB) and the World Trade Organization (WTO).
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  • 1. 1Multilateral Newsletter this IssueInside Focus Story BRICS and Beyond...............................................................2 WORLD BANK World Bank Approves $650 Million for the Eastern Dedicated Freight Corridor Project, India.................................4 Government of India and World Bank Sign $250 Million Project for Disaster Recovery in Andhra Pradesh..................4 July 2015, Volume 3, Issue 6 Message from Mr Chandrajit Banerjee, Director General, CII BRICS countries are an important trading partners of India. India’s export to China, Brazil, Russia and South Africa has reached approximately upto US$28.5 billion while imports from these close to US$ 28.5 billion in 2014. During 2003-2015, Indian Companies have also invested US$23.32 billion in other BRICS countries which has created about 74,723 employment opportunities in the recipient economies. Brazil, Russia, China and South Africa together have also invested around $22.12 billion and created 79,156 jobs in India. BRICS today represents much more than merely an investment narrative, this group now has significant political and economic dimension. The BRICS initiative aims to strengthen South-South engagement, provide unique avenue to advance the regional and global strategic interests and offer new investment vehicles to the member countries. There lies a need to explore new areas towards a comprehensive cooperation and a closer economic partnership to facilitate market inter-linkages, financial integration, infrastructure connectivity as well as people-to-people connectivity. The focus story of this edition provides an insight towards the opportunities and the challenges that exist within the BRICS economies. In addition, it also covers some of the key happenings at the World Bank (WB), Asian Development Bank (ADB) and the World Trade Organization (WTO). Chandrajit Banerjee Multilateral ADB ADB Trims Growth Forecasts for Asia on Slower US, PRC Economies�������������������������������������������������������������������������5 WTO Slight deceleration in trade restrictive steps in G-20: WTO������9 NEWSLETTER
  • 2. 2 Multilateral Newsletter More than a decade after the acronym BRICS was coined by Goldman Sachs to represent Brazil, Russia, India, China, and South Africa, BRICS - today signifies the collective economic power of the world’s leading emerging market economies. Today, BRICS accounts for more than a quarter of the world’s land mass, 41% of the world’s population, and a combined GDP of nearly US$ 16 trillion in nominal terms and US$ 37.4 trillion (in PPP terms). The common feature that binds these countries is their large fast growing economies. India attaches importance to its engagement with BRICS. Apart from the Prime Ministers, India has participated in all the BRICS Meetings of Foreign Ministers, Finance Ministers, Agriculture Ministers, Trade Ministers, Health Minsters, High Representatives on Security, Business Forum, etc. BRICS countries are now important trading partners of India. India’s export to China, Brazil, Russia and South Africa has reached US$28.5 billion in 2014 while India’s import from them was close to US$74 billion. The main products of Indian exports to BRICS include Mineral fuels, oils, distillation products, Cotton, Copper and articles Organic chemicals, Vehicles other than railway, tramway, Machinery, nuclear reactors, boilers, Pharmaceutical products, Ores, slag and ash, Salt, Sulphur, earth, stone, plaster, lime and cement and many more. During 2003 – 2015, Indian companies have invested US$23.32 billion in other BRICS countries which has created about 74,723 jobs in the recipient economies. Brazil, Russia, China and South Africa together have also invested about $22.12 billion and created 79,156 jobs in India. The $100 billion New Development Bank is a major milestone much as with Mr K V Kamath, the veteran Indian banker, becoming the first President. Investment flow into India would increase with the coming advent of the BRICS bank. The infrastructure financing deficit in developing countries is estimated to be $1 trillion annually. For India and South Africa, the BRICS Bank promises to be a welcome source of much-needed infrastructure financing. Countries will be more benefited by the BRICS bank as they would have access to funding at more favourable terms. The leaders from BRICS countries met on 9 July 2015 in Ufa, Russia at the Seventh BRICS Summit themed ‘BRICS-Partnership- a Powerful Factor for Global Development’ with an aim to strengthen BRICS solidarity and cooperation, and further enhance partnership on basis of principles of openness, solidarity, equality and mutual understanding, inclusiveness and mutual beneficial cooperation. The Ufa Summit marked the onset of BRICS financial institutions: the New Development Bank (NDB) and the Contingent Reserves Arrangement (CRA). The global recovery continues, although growth remains fragile, with considerable divergence across countries and regions. In this context, emerging markets and developing countries continue to be the major drivers of global growth. Structural reforms, domestic adjustments and promotion of innovation are important for sustainable growth and provide a strong and sustainable growth and provide a strong and sustainable contribution to the world economy. Development and security are closely interlinked, mutually reinforcing and key to attaining sustainable peace. Establishment of sustainable peace requires a comprehensive, concerted and determined approach based on mutual trust, benefit, equity and cooperation. Sound macroeconomic policies, efficiently regulated financial markets and robust levels of reserves have allowed the BRICS economies to deal better with the risks and effects presented by the challenging global economic conditions in last few years. Focus Story BRICS and Beyond
  • 3. 3Multilateral Newsletter Peaceful coexistence of nations is impossible without universal, scrupulous and consistent application of the generally recognized principles and rules of international law. International Law provides tools for achieving international justice based on principles of good faith and equality. In addition to fundamentally altering the global economic governance order, the economies today present a spectrum of opportunities for collaboration. CII feels that the BRICS countries should deepen their economic and trade relations. Greater cooperation with each other will help them to reinforce their position in world affairs. These some of the key areas where the BRICS countries could work together include: Manufacturing: Especially in the light of the “Make in India” initiative. Companies from China, Russia, Brazil• and South Africa may like to take advantage of the liberalized FDI norms in the defence, automobile and other sectors and step up their presence in India. Technology Transfer: ICT are emerging as an important medium to bridge the gap between developed and• developing countries. Technology sharing amidst the BRICS nations can be a lucrative investment for long term development of the economies. India may offer its capacities in technology transfers in – ICT, Healthcare pharmaceuticals, Power, Infrastructure, and HRD training. To empower and Inclusion of ICT related issues in the post 2015 development agenda Energy and Green Economy: The BRICS economies can work together on promotion of new technology in• the energy sector. Clean coal technologies, coal liquefaction, know-how on alternative sources of energy, technologies including inexpensive photo-voltaic chips and application of deep-sea technology popularization are a few to name. The countries can collaborate closely on energy security, emissions, efficiency, and renewable energy as well as on global discussions on mitigating climate change. Financial services: As the financial markets in BRICS are at different stages of development, there is considerable• scope for the BRICS to learn from each other by exchanging experts and country experiences. There is also a need to align the licensing processes to facilitate investment in the banking sector. Food Processing: These five countries collectively have a huge potential for addressing food security concerns• around the globe. Governments, agri-businesses and farmer associations can collaborate to enhance the sustainability and safety in farming practices. In addition, there is potential to exchange technology in precision seeding, precision fertilizer, farm mechanization and installation of cold chains. Smart Cities: With the Government of India launching its flagship “Smart Cities” project, cooperation from• BRICS countries would be valuable in areas such as urban planning, waste management, water management and cycling infrastructure. The challenges faced by the BRICS economies are similar to the problems faced by emerging markets and developing countries. Hence, it is important to strengthen the coordination and cooperation among BRICS agencies. There lies a need for comprehensive, transparent and efficient multilateral approaches to address global challenges. The peaceful coexistence of nations is impossible without universal, scrupulous and consistent application of the generally recognized principles and rules of international law. Focus Story
  • 4. 4 Multilateral Newsletter The World Bank Board approved $650 million towards the third loan for the Eastern Dedicated Freight Corridor (a freight-only rail line) that will help faster and more efficient movement of raw materials and finished goods between the northern and eastern parts of India. The Eastern Corridor is 1,840 km long and extends from Ludhiana to Kolkata. The World Bank is supporting the Eastern Dedicated Freight Corridor (EDFC) as a series of projects in which the three sections with a total route length of 1,146 km will be delivered sequentially, but with considerable overlap in their construction schedules. The EDFC is part of India’s first Dedicated Freight Corridor (DFC) initiative – being built on two main routes – the Western and the Eastern Corridors. These corridors will help India make a quantum leap in increasing the railways’ transportation capacity by building high-capacity, higher-speed dedicated freight corridors along the Golden Quadrilateral. Currently, the rail routes that form a Golden Quadrilateral connecting Delhi, Mumbai, Chennai and Kolkata, account for 16 percent of the railway network’s route length, but carry more than 60 percent of India’s total rail freight. Click here for more information The Government of India, the Government of Andhra Pradesh and the World Bank signed a $250 million credit agreement for the Andhra Pradesh Disaster Recovery Project to restore, improve and enhance the resilience of public services and livelihoods of communities affected by cyclone Hudhud in Andhra Pradesh. The Project will also increase the capacity of the state to respond promptly and effectively to an emergency. The project will specifically benefit over 13 million people in the four severely affected districts of Srikakulam, Vizianagaram, Visakhapatnam and East Godavari. Andhra Pradesh is one of the most natural hazard prone states in India because of its long coastline and geographical location. About 44 percent of the state is vulnerable to tropical storms and related hazards. Out of the total coastal length of about 974 km, about 440 km faces coastal erosion. Click here for more information World Bank Approves $650 Million for the Eastern Dedicated Freight Corridor Project, India Government of India and World Bank Sign $250 Million Project for Disaster Recovery in Andhra Pradesh WORLD BANK “Implementing the Dedicated Freight Corridor program will provide India the opportunity to create one of the world’s largest freight operations. The corridor, which will pass through states like Uttar Pradesh and Bihar, will benefit from the new rail infrastructure, bringing jobs and much-needed development to some of India’s poorest regions” Onno Ruhl World Bank Country Director in India
  • 5. 5Multilateral Newsletter ADB The Asian Development Bank (ADB) has cut its 2015 growth forecast for Developing Asia to 6.1% from 6.3%, amidst slower-than-expected economic activity in the United States (US) and the People’s Republic of China (PRC), according to a new report. In a supplement to its Asian Development Outlook (ADO) 2015 published last March, ADB also projected 2016 gross domestic product (GDP) growth for the region to come in at 6.2%, down from 6.3% forecast previously. ADO is ADB’s flagship annual economic publication. Ongoing softness in the major industrialized economies (US, Japan, Euro Area) will see a slowdown in East Asia as a whole, with growth now at 6.2% in 2015, down from 6.5% forecast earlier. After a slow first half, full-year 2015 growth in the PRC is now estimated at 7.0%, down from 7.2% previously, and will ease further to 6.8% next year. Consumption growth in the country remains robust but investment growth has continued to decelerate. The financial sector is also expected to contribute less to growth after the recent stock market correction, although the drop in stock prices is unlikely to have much impact on consumption, the report said. In India, growth forecasts remain unchanged at 7.8% in fiscal year (FY)2015 and 8.2% in FY2016, supported by a healthy monsoon and new investments. South Asia as a whole is now expected to grow 7.3% in 2015, up slightly from 7.2% seen earlier, with a better-than-expected economic performance in Bangladesh balancing the earthquake-related slowdown in Nepal. In 2016, growth for the subregion is expected to expand to 7.6%. Click here for more information ADB Trims Growth Forecasts for Asia on Slower US, PRC Economies Slower growth in the PRC is likely to have a noticeable effect on the rest of Asia given its size and its close ‎links with other countries in the region through regional and global value chains Shang-Jin Wei ADB Chief Economist
  • 6. 6 Multilateral Newsletter The G-20 economies witnessed a slight deceleration in application of new trade-restrictive measures, with average number of such steps imposed per month falling to the lowest since 2013, a WTO report However, the report called for continued vigilance and reinforced determination towards eliminating the existing trade restrictions. G-20 economies between mid-October 2014 and mid-May 2015 implemented fewer trade-restrictive measures per month than at any time since 2013. At the same time, the introduction of trade liberalising measures among the G-20 members remained stable. These positive developments confirm that G-20 economies have shown some restraint in introducing new trade restrictions while continuing to introduce measures that facilitate the flow of trade, the WTO's 13th trade monitoring report on G-20 trade measures said. It has covered the period from 16 October 2014 to 15 May 2015. G-20 is a grouping of developed and developing economies. Its members include the US, Japan, Germany, the UK, France, China and India. The report said that despite these recent trends, it is not yet clear that the deceleration in the number of measures introduced will continue in future reporting periods. Therefore, continued vigilance and reinforced determination towards eliminating existing trade restrictions remain an important priority, it added. Trade restrictive measures include mandatory local source requirement and others. Further, it added that the long-term trend remains one of concern with the overall stock of trade-restrictive measures introduced by G-20 economies since 2008 continuing to rise. Of the 1,360 restrictions recorded by this exercise since 2008, less than a quarter have been eliminated, leaving the total number of restrictive measures still in place at 1,031. Therefore, despite the G-20 pledge to roll back any new protectionist measures the stock of these measures has risen by over 7 per cent since the last report, it said. The report also said that among the emerging nations, China and India have continued to outpace other major economies. GDP growth remained positive in China (7 per cent), Brazil (1 per cent), and India (7.8 per cent) in the second half of last year, it said. Slight deceleration in trade restrictive steps in G-20: WTO WTO Copyright © 2015 by Confederation of Indian Industry (CII), All rights reserved. No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of the copyright owner. CII has made every effort to ensure the accuracy of information presented in this document. However, neither CII nor any of its office bearers or analysts or employees can be held responsible for any financial consequences arising out of the use of information provided herein. However, in case of any discrepancy, error, etc., same may please be brought to the notice of CII for appropriate corrections. Published by Confederation of Indian Industry (CII), The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi-110003 (INDIA) Tel: +91-11-24629994-7, Fax: +91-11-24626149; Email: info@cii.in; Web: www.cii.in For suggestions please write to us at: multilateralforums@cii.in
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