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BRICS,6TH

Prime Minister Narendra Modi leaves on Saturday for Brazil for attending the five-nation summit of BRICS nations on July 14 and 15 which is expected to finalise the setting up of a development bank and seek reforms of the United Nations and international financial organisations.

After a stopover in Berlin tomorrow night, he will leave for Fortaleza, the north-eastern coastal city of Brazil, on Monday for the summit of leaders of Brazil, Russia, India, China and South Africa to be held on July 15, providing him his first opportunity at multilateral engagement.

An earlier plan to have a meeting with Chancellor Angela Merkel in Berlin was shelved because of Germany’s entry into the Fifa World Cup final, for which she will be in Brazil.

Modi will be accompanied by a high-level delegation that includes Minister of State for Finance Nirmala Sitharaman, National Security Adviser A K Doval, Foreign Secretary Sujatha Singh and Finance Secretary Arvind Mayaram.

The sixth summit of BRICS, which will follow up on the decisions of the Durban meeting last year, will provide the new Indian prime minister his first opportunity at meeting world leaders, including President Xi Jinping of China and Vladimir Putin of Russia, and discuss bilateral issues.

A Fortaleza Declaration containing the summit outcome is also on the cards. Negotiations are already on for which Sujata Mehta, Secretary, Economic Relations, External Affairs Ministry, is Modi’s sherpa.

BRICS accounts for more than a quarter of the world’s land mass, 40 per cent of its population and a combined GDP of USD 24 trillion.

Officials say that India will be hoping for an endorsement of the need for UN Security Council reforms and also those of the Bretton Woods institutions like the World Bank and IMF.

The BRICS Development Bank is expected to take further shape with a decision to concretise its corpus at USD 100 billion, about which there was a broad agreement in Durban.

Discussions are on about the contribution from each member state and where to locate its headquarters — whether Shanghai or New Delhi.

It will be a development bank which will give concessional credit to members of BRICS and other developing countries.

There will be a ministerial meeting ahead of the summit and also a BRICS business council with businessmen from member -countries who will be meeting on July 14 and 15.

On the sidelines of the summit, he will also be meeting South African President Jacob Zuma besides host President Dilma Roussef of Brazil.

On July 16, the BRICS leaders will move to the Brazilian capital, Brasilia, where they will meet leaders of South America, who have been invited by the hosts on the lines of Zuma inviting African leaders to Durban.

The Prime Minister will get an opportunity to engage with the Latin American region through meeting the leaders of South America, including heads of state and government from countries like Argentina, Bolivia, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela.

BRICS of a new world

The Fortaleza summit should address the undermining of the multilateral trading system.

Prime Minister Narendra Modi’s first major foreign visit, to the BRICS summit in Fortaleza, Brazil, is in the news for a variety of reasons. But there is little discussion on what is at stake and the possible takeaways for BRICS, and particularly India.

This is a crucial moment for the world, faced with a central European face-off, the long tail of the financial crisis, trouble in the western Pacific, a stalemate on trade and environment, new contests in cyberspace and outer space and a new irrationality in the Middle East. BRICS, particularly India, are vulnerable to downward spirals in any of these areas. India must seek to first protect and then promote its interests at this platform. The new prime minister is the right man for this task and there are five key areas he must navigate.

The first is the big-ticket BRICS-led development bank, proposed at the New Delhi summit in 2012. While China has clear ambitions, a worse outcome would be to allow the creation of a Chinese version of the Asian Development Bank. The new bank must follow a one-country-one-vote formula, and allow other states and institutions to invest capital in return for a minority controlling stake and returns commensurate to their investments. BRICS members must walk the talk on the “equity and fairness” they seek from the West. By allowing each BRICS country equal weight in ownership of the bank, they would demonstrably craft a model for other IFIs to emulate.

The second area is global trade and investment. Through the proposed Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), developed economies are seeking to redirect trade and investment flows. They will do so by instituting new rules, standards and tariffs, and by gradually dismantling the multilateral system (WTO) that India and others believe to be essential. BRICS must seek to counter the negative externalities from such mega free trade arrangements (FTAs). While it is expected that BRICS will announce export guarantees and agreements on innovation and banking, the members must also commission academic assessments of the impact of imminent mega FTAs and coping strategies.

Third, BRICS must mitigate the systemic risks posed by the imbalances in the global economic system, perpetuated by the central banks of advanced economies. BRICS leaders are expected to launch a foreign exchange reserve fund of $100 billion as a hedging mechanism. This will resemble the Chiang Mai Initiative, put in place by Asean+3 after the Asian financial crisis of the late 1990s. It is essentially a pooling arrangement, with China contributing $41 billion, Brazil, Russia and India $18 billion, and South Africa $5 billion.Indeed, Modi would do well to suggest that BRICS take a principled position on recent policy decisions by Western central banks, already suspected to be fuelling new asset class bubbles.

Fourth, over the years, political content in the outcome statement has increased dramatically. BRICS states will need to discover common approaches on political developments in different regions. In particular, the stability of southwest Asia is critical to India, and as the US withdraws from Afghanistan, there is bound to be a jostle for political capital. Can BRICS catalyse the RIC (Russia, India and China) into discovering a basis for meaningful cooperation in the region? Here, the bilateral meetings on the sidelines will be vital. Similarly, Russian expectations on collective support for its position on Ukraine will need to be delicately managed.

The fifth area pertains to cyber governance and cybersecurity. There are clear differences in the positions of BRICS members. Russia has passed a bill requiring all technology companies to store personal user data on domestic servers. This closely mirrors developments in China that ensure local data storage and government control. Meanwhile, the Brazilians, who hosted the “Net Mundial”, have positioned themselves alongside the US and EU, favouring a multi-stakeholder framework. India sees a greater “state” role as it seeks to connect its “next billion” to the internet. There is an opportunity to recognise these cleavages, and develop a calibrated approach for discovering common digital ground. That each BRICS member has either the US or EU as its most important economic partner in the digital world may help.

The Fortaleza summit will represent the reboot of BRICS. This is a different world altogether, with the Brazilians seemingly reasserting a “Lulaesque” style of external engagement, the Russians defiant and petulant at the same time, the Chinese testing the geographical limits of their economic and political ambitions, and the South Africans seemingly wedded to their regional aspirations. Prime Minister Modi has the biggest political mandate among his BRICS counterparts, and also the weight of the largest expectations

A leadership moment

At BRICS summit, a chance for India to start on a path that leads to the UNSC.

Next week, Prime Minister Narendra Modi will attend his first BRICS summit. This is a historic opportunity to position India in a changing global order. India today punches below its weight on global issues. It is a member of the G-20 but plays a marginal role in guiding global discussions. A previous BJP government put India into the nuclear club, and this government could take us all the way to a permanent seat on the UN Security Council. The BRICS summit is an opportunity to start down that path.

The prime minister made a bold start by inviting all SAARC leaders to his inauguration. With festering problems in its own neighbourhood, India is no doubt distracted locally and thereby hobbled in projecting its power more broadly in global affairs. With a better functioning SAARC, India can speak on global issues with a stronger sub-regional backing.

India’s most clearly stated international goal is to have a seat on the UNSC. On the basis of its size as one-sixth of humanity and the third largest economy (PPP adjusted), its claim cannot be challenged. Yet, progress on this issue has been glacial. India today has very few senior positions at the UN. No Indian heads a single UN organisation. China, besides having a permanent UNSC seat, heads three UN organisations. Brazil has strong interests in trade and agriculture and now heads the FAO and WTO, positions it won with greater strategic clarity and concerted effort.

Getting a permanent UNSC seat will also require building coalitions with other key aspirants, such as Brazil and South Africa, and getting the support of China and Russia, which are permanent members. The BRICS summit is a chance to open the dialogue.

The most immediate concrete idea for discussion will be the new BRICS bank, which will rival existing multilateral banks with call-in capital of $50 billion. This is an important signal but will eventually require a bigger capital base,  which could come from increasing the contributions of the existing members to at least $100 billion or bringing in other large G-20 developing countries as contributors. For India, which has maxed out its borrowing capacity at the World Bank and the Asian Development Bank, the new bank could be a great opportunity to get long-term capital for its huge infrastructure needs.

Germany and Japan are two other key aspirants to the UNSC with whom India can and must ally. The big powers must be made to realise that global peace will require India’s active participation, a position that can only be reached when India begins to play a more strategic role, especially in Africa,the Middle East and Asia, in helping broker positive solutions.

India must also show leadership in ideas. India accepted the UN’s Millenium Development Goals for 2015 with some reluctance. In the run-up to the post-2015 discussions, India again tends to make unnecessary arguments as a sanctimonious champion of the poor by arguing that it stands for poverty eradication but against objectives it characterises are Western impositions.

The new government, which won the election on a promise of better governance, must put an end to such positions. We know that better governance is the route to faster growth, job creation and poverty eradication. We know that only a fraction of development money reaches the poor. So why not contribute to  a practical way forward in building a global consensus on development and better governance?

India will also increase its chances for a permanent UNSC seat if it plays a more constructive and active role in the G-20. India had long argued that the G-7 is no longer a legitimate body. But having arrived at the high table at the G-20, it seems India is just happy to be there. It has not pushed any new initiatives, or displayed the kind of constructive role that would help its UNSC candidacy.

As the prime minister meets BRICS leaders next week, and then prepares for a series of meetings at the UN in September and the G-20 in Australia in November, he might wish to provide strategic leadership to how India approaches these vital issues. He can bring India back into active leadership positions on global issues and take us to a permanent seat on the UNSC. Now, that would be a landmark achievement. But let us start on that journey by founding the BRICS bank.

Plan allocation for urban development projects increased by 251%

General Budget for 2014-15 seeks to meet aspirations of middle and lower-middle classes Smart Cities Project allocated Rs.7,060 cr under Plan Head Rs.50,000 cr to finance urban infrastructure projects

Acknowledging the importance of urban development and urban renewal to meet the growing aspirations of the people for better urban living, the union government has increased Plan Outlay for urban related projects by 251.44% in the General Budget for 2014-15 presented to the Parliament yesterday. The Plan Outlay which was Rs. 6,561.34 cr in the Revised Budget for 2013-14 has been hiked to Rs.16,497 cr for the current financial year. To meet the demands of better urban living from growing urbanization, besides increasing Plan Outlay, the government has offered tax and non-tax incentives to promote investments in urban infrastructure and housing sectors. Noting that ‘a neo-middle class is emerging which has aspiration of better living standards’, the government has provided Rs.7,060 cr for realizing the Prime Minister Shri Narendra Modi’s vision of developing “one hundred Smart Cities”. These cities will be developed as satellite towns of large cities and by modernizing the existing mid-sized cities. These Smart Cities will accommodate the burgeoning number of people without which the existing cities would soon become unviable. Assistance to the ongoing Metro Rail Projects in the cities of Delhi, Jaipur, Mumbai, Kolkata, Bengaluru, Chennai and Kochi has been substantially increased by Rs.2,265 cr to Rs.8,025 cr as against Rs.5,759 cr. In addition, Rs.100 cr has been provisioned for the new Metro projects in Lucknow and Ahmedabad. In a major initiative, the government has proposed a corpus fund of Rs. 50,000 cr to promote and finance infrastructure projects in urban areas on shared risk basis under ‘Pooled Municipal Debt Obligation Facility’ over a period of five years. This facility set up in 2006 has corpus of only Rs.5,000 cr. A new ‘Mission on Low Cost Affordable Housing’ will be launched under which Rs.4,000 cr has been provisioned for providing cheaper credit for affordable housing to the urban poor, Economically Weaker Sections(EWS) and Low Income Group(LIG) segments through National Housing Bank. Other proposals and incentives to urban projects include: 1. To encourage development of Smart Cities, requirement of the built up area for Foreign Direct Investment(FDI) has been reduced from 50,000 square metres to 20,000 sq.metres and capital requirement from US $ 10 million to US $ 5 million; 2. To further encourage this activity, such projects committing at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalization requirements, with the condition of three year lock in; 3. Supporting 500 habitations for providing safe drinking water and sewerage management, use of recycled water for growing organic fruits, solid waster management digital connectivity through private capital and expertise through Public Private Partnership(PPP) to renew their infrastructure and services in the next ten years; 4. Promotion of Metro Rail projects including light rail systems in two million plus cities in the PPP mode with central governments support through VGF; 5. Inclusion of slum development in the list of Corporate Social Responsibility(CSR) activities to encourage private sector contribution; 6. Increasing the deduction limit on account of interest on loan in respect of self occupied house property from Rs.1.50 lakh to Rs.2.00 lakh to address the concerns of middle and lower middle classes due to high cost of financing; 7. Conducive tax regime for Real Estate Investment Trusts and the proposed new ‘Infrastructure Investment Trusts’ to promote investments in infrastructure and construction sectors which play a significant role in reviving the economy. Following presentation of General Budget to the Parliament yesterday, Minister of Urban Development and Housing & Urban Poverty Alleviation Shri M. Venkaiah Naidu has directed the senior officials of the two ministries for initiating action immediately for operationalizing new initiatives.

High Speed Train Project

It is planned to have a Diamond Quadrilateral Network of High Speed Rail, connecting major metros and growth centres of the country. The Mumbai-Ahmedabad sector has been identified as the first corridor to start High Speed Trains. The cost of laying per kilometer track of Bullet Train (High Speed Train) is approx. Rs. 80-120 crore, as compared to Rs. 10-12 crore for ordinary track and Rs. 150-200 crore for metro tracks. The High Speed Rail Project will have to be taken up through an appropriate mix of Government support, multilateral/bilateral funding by alternative means of resource mobilization, including Public-Private-Partnership (PPP).

Green Hospitals

Health is a State subject and it is the responsibility of the State Governments to provide environment friendly infrastructure. Central Government supplements their efforts by way of providing assistance for new construction/renovation of existing infrastructure, setting up of Health Centres and hospital strengthening etc. As far as three Central Government Hospitals in Delhi namely Safdarjung Hospital, Dr. RML Hospital and LHMC & associated Hospitals are concerned, they are tertiary care hospitals and providing specialty and super specialty services in almost all the branches of medicines and surgery and their infrastructure is adequate to address the adverse health outcome as a result of environmental degradation.             Since these Hospitals are very old, the requirement of environment friendly hospitals is taken into account during their expansion/up-gradation and it is ensured to get GRIHA Certification during their expansion/up-gradation. In LHMC, solar panels have been installed on the roofs of the hospital building, undergraduate women hostels and house surgeon hostels and rain water-harvesting wells have been constructed. Effluent treatment plant and sewage treatment plant has been approved for new building in LHMC. Safdarjung Hospital is in the process of identifying areas where Greening could be done. AIIMS is also making   assessment of the AIIMS complex to arrive upon methodology for converting existing Building into Green Building.   Following areas of inputs have been identified to achieve the objective: (i)                Electrical supply and distribution system including lighting system; (ii)             HAVC system; (iii)           Tri-generation system; (iv)           Water management; (v)              Solid waste management; (vi)           Urban heat island, indoor and outdoor air quality etc. Benefits of Green Hospital includes saving of energy; reducing in carbon emission; saving water by use of recycled water; environment friendly waste recycling, enhancing air quality, etc.