TIME brics

The BRICS Don’t Like the Dollar-Dominated World Economy, but They’re Stuck With It

World For Money
Thomas Trutschel—Photothek/Getty Images

The latest summit of the world’s leading emerging markets took more steps toward replacing the U.S.-led global financial system. But change will come very, very slowly

When the BRICS get together for their annual summit — as they did last week in Brazil — they always make a lot of noise about changing the way the global economy works. They have good reason to be frustrated. The BRICS (Brazil, Russia, India, China and South Africa) are gaining in economic power and crave the political clout to match, but standing in the way is a global financial system organized by the West and dominated by the U.S. They’re forced to conduct their international business in the unstable U.S. dollar, making their economies swing back and forth with the winds of policy crafted in Washington, D.C., and New York City. The West has ceded influence in institutions like the World Bank and the International Monetary Fund (IMF) only grudgingly. To them, today’s financial system is out of touch with the changing times, and ill-suited to support the world’s up-and-coming economic titans.

So in their summit, from July 14 to 16, the five BRICS announced two major initiatives aimed squarely at increasing their power in global finance. They announced the launch of the New Development Bank, headquartered in Shanghai, that will offer financing for development projects in the emerging world. The bank will act as an alternative to the Washington, D.C.—based World Bank. The BRICS also formed what they’re calling a Contingent Reserve Arrangement, a series of currency agreements which can be utilized to help them smooth over financial imbalances with the rest of the world. That’s something the IMF does now.

Clearly, the idea is to create institutions and processes to supplement — and perhaps eventually supplant — the functions of those managed by U.S. and Europe. And they would be resources that they could control on their own, without the annoying conditions that the World Bank and the IMF always slap on their loans and assistance. Carlos Caicedo, a Latin America analyst at consulting firm IHS, noted, for instance, that the New Development Bank “has the potential to match the role of multilateral development banks, while offering the BRICS a tool to counterbalance Western influence in international finance.”

In theory at least, the BRICS possess the financial muscle to make that happen. Four of the BRICS — China, India, Brazil and Russia — are now ranked among the world’s 10 largest economies. (South Africa, not a member of the original constellation of BRICs as conceived by Goldman Sachs, comes in a distant 33rd.) Yet the reality is more problematic. The BRICS at this point are simply not committing the resources necessary to make anything but a dent in global finance.

Research firm Capital Economics estimates that the New Development Bank, with initial capital approved at only $100 billion, could offer loans of $5 billion to $10 billion a year over the next decade. Though that’s not an insignificant amount, it’s far lower than the $32 billion the World Bank made available last year. The situation is the same with the currency swaps. Set at a total size of $100 billion, the funds available would be a fraction of those the IMF can muster.

That’s assuming these initiatives ever get off the ground. This sixth BRICS summit is the first to produce anything beyond mere rhetoric, and it remains to be seen if they can cooperate on these or any other concrete projects. Despite their common distaste for the U.S.-led global economy and desire for development, the BRICS share as many differences as similarities. They have vastly diverse levels of development and types of political systems, and the bilateral relations between some of them are strained. India and China, for instance, routinely spar over disputed territory, while Brazil sees China as much as an economic competitor as partner.

Beyond that, all of the BRICS have serious economic problems to deal with at home. The new government in India led by Prime Minister Narendra Modi will be hard pressed to implement the reforms necessary to jumpstart the country’s stalled economic miracle. Growth in Brazil, South Africa and Russia has been even more sluggish. China’s growth has held up, but it suffers from rising debt, risky shadow banking and excess capacity. And now Moscow has to contend with sanctions imposed by the U.S. and Europe over its aggressive policy toward Ukraine. It may soon face even greater isolation as the world probes its connections to the separatists in Ukraine, who reportedly downed Malaysian Airlines Flight 17 with the loss of nearly 300 lives.

Meanwhile, whether they like it or not, the BRICS will be stuck operating by the rules of the U.S.-led world economy for the foreseeable future. There is simply no other currency out there that can replace the U.S. dollar as the No. 1 choice for international financial transactions. China has dreams of promoting its own currency, the yuan, as an alternative, and has made some progress. But the yuan can’t truly rival the dollar until China undertakes some fundamental financial reforms — liberalizing the trade of the yuan and capital flows in and out of the country. That’s far-off. And until then, China’s massive reserve of dollars forces it to continually invest in dollar assets. Even as Beijing bickers with the U.S. over cyberspying and regional territorial disputes, it has been loading up on U.S. Treasury securities — buying at the fastest pace on record so far this year.

Still, the steps taken during this latest BRICS summit point to what may be the future of the global economy. Though their initiatives may be small and tentative now, they signal an intent to remake the global financial system in their own interest as they continue to grow in economic power. Perhaps one day it’ll be the U.S. that does the complaining.

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TIME India

6-Year-Old Gang-Raped in Indian School by Staff Members, Say Police

Demonstrators from AIDWA hold placards and shout slogans during protest against recent killings of two teenage girls, in New Delhi
Demonstrators from the All India Democratic Women's Association hold placards and shout slogans during a protest against the rape and murder of two teenage girls, in New Delhi on May 31, 2014 Adnan Abidi—Reuters

India’s National Crime Records Bureau says one rape was reported in India every 21 minutes last year

Furious parents are protesting outside a prominent school in the southern Indian city of Bangalore, where a 6-year-old girl was allegedly raped by two members of staff.

Police say the July 2 assault has only now been reported after the girl complained of stomach pains and was taken by her parents to seek medical attention, reports the BBC.

No arrests have yet been made, but family members of pupils at the school have reacted with considerable anger, tearing down the building’s gates and haranguing staff.

“They have handled [the matter] very shoddily,” Vivek Sharma, the father of a student, told the BBC.

The case will be a test for new Prime Minister Narendra Modi, who promised during his election campaign to protect the nation’s 614 million women, but raised eyebrows with a first budget that earmarked only $25 million for women’s safety but $33 million for the world’s largest statue in his home state of Gujarat.

Sexual violence in India has become headline news since the 2012 gang rape and murder of a medical student aboard a bus in the capital New Delhi. According to India’s National Crime Records Bureau, during 2013, one rape was reported every 21 minutes, despite the vast majority of attacks believed to go unreported.

[BBC]

TIME India

India Is Home to More Poor People Than Anywhere Else on Earth

Poverty of slums at New Delhi
Slum dwellers lead their life in poverty and unhealthy conditions in New Delhi, India on March 10, 2014. Anadolu Agency—Getty Images

"We don't have to be proud of what we've done," one minister says

One third of the world’s 1.2 billion poorest people live in India, according to the latest Millennium Development Goals report by the U.N.

India only managed to reduce its poverty rate (the ratio of the number of people who fall below the poverty line and a country’s total population) from 49.4% in 1994 to 42% in 2005 and 32.7% in 2010. By contrast, regional rival China brought it down from 60% in 1990 to an impressive 16% in 2005 and just 12% in 2010.

India also accounted for the highest number of under-five deaths in the world in 2012, with 1.4 million children not reaching their fifth birthday.

“We don’t have to be proud of what we’ve done,” admitted minority affairs minister Najma Heptulla to the Times Of India on Wednesday. “Poverty is the biggest challenge.”

TIME BRIC

BRICS Nations Agree to Create Own Development Bank

Vladimir Putin, Jacob Zuma, Narendra Modi, Dilma Rousseff
Russia's President Vladimir Putin, left, India’'s Prime Minister Narendra Modi, second left, and Brazil’'s President Dilma Rousseff, right, greet South African President Jacob Zuma, second right, after his speech during the BRICS 2014 summit in Fortaleza, Brazil, Tuesday, July 15, 2014. Silvia Izquierdo—AP

The New Development Bank will have an African regional branch in South Africa and eventually other nations would be able to participate

(FORTALEZA, Brazil) — The leaders of five emerging market powers said at a summit Tuesday that they gave final agreement to creating their own development bank worth $100 billion that will have its headquarters in China.

The first president of the New Development Bank will be from India and the position will rotate every five years among Brazil, Russia, India, China and South Africa — the so-called BRICS nations, a joint statement from the leaders said.

BRICS leaders conferred in a closed session earlier in the day at their conference in northeastern Brazil, then announced concrete plans for the bank at an afternoon session open to the press.

The new bank is seen as a strong push by the BRICS against the World Bank and the International Monetary Fund, which the developing world has long complained it far too U.S.- and European-centric.

“Based on sound banking principles, the NDB will strengthen the cooperation among our countries and will supplement the efforts of multilateral and regional financial institutions for global development,” the statement said.

Russian Foreign Minister Sergey Lavrov told the Russian news agency ITAR-Tass that the decision “confirmed that BRICS members, while speaking against unilateral actions in the world economy and politics, are not seeking confrontation but propose working out collective approaches toward the resolution of any problems.”

The New Development Bank will have an African regional branch in South Africa and eventually other nations would be able to participate.

The statement also alluded to Brazil’s and India’s longstanding quest to overhaul the United Nations Security Council, of which China and Russia are two of five permanent members with veto power. Those nations have in the past proved reluctant to endorse Brazil’s and India’s ambitions, but Tuesday’s statement said the BRICS nations “support their aspiration to play a greater role in the U.N.”

Though exhaustive, the joint statement largely steered clear of potentially divisive issues, like the conflict in Ukraine between pro-government and pro-Russia factions.

It touched only briefly on the matter, saying the five countries expressed their “deep concern” with the situation in Ukraine and urged “comprehensive dialogue, the de-escalation of the conflict and restraint from all the actors involved, with a view to finding a peaceful political solution, in full compliance with the U.N. Charter and universally recognized human rights and fundamental freedoms.”

TIME India

Yet Another Teen Girl Raped in India for Apparent Revenge

Demonstrators from AIDWA hold placards and shout slogans during protest against recent killings of two teenage girls, in New Delhi
Demonstrators from All India Democratic Women's Association hold placards and shout slogans in New Delhi on May 31, 2014, during a protest against the recent killings of two teenage girls Adnan Abidi—Reuters

Village leader is accused of ordering girl's rape to make up for her brother's alleged misconduct

A teenage girl has been raped in a suspected case of “retaliatory justice” in India’s eastern state of Jharkhand, according to police.

The 14-year-old girl was allegedly raped after villagers accused her brother of assaulting another woman, reports the BBC.

Three people have been arrested in connection with the attack, including the village leader who is accused of ordering the rape as a method of “eye-for-an-eye” justice.

The alleged crime comes amid burgeoning recognition in India that sexual violence has reached crisis proportions since the gang rape and murder of a female student aboard a private bus in the capital New Delhi in 2012. Four of the attackers in that case were sentenced to death, and the Indian government has since enacted several reforms designed to curb violence against women.

In the most recent attack, the head of a remote village in Jharkhand allegedly gave the order to have the teenager raped after her brother committed “misbehavior” toward another woman. The girl was taken to a hospital and has made a police statement, reports the BBC.

“This rape happened out of retaliation,” Jharkhand police chief Rajiv Kumar told the BBC.

[BBC]

TIME India

India Sees Red Over $33 Million Statue in PM Modi’s First Budget

India Budget
An Indian worker carries a sack containing copies of the 2014-15 union budget at the Indian parliament in New Delhi, Thursday, July 10, 2014. Manish Swarup—AP Photo

Opponents accuse Prime Minister Narendra Modi of putting the reverence of long-dead founding fathers over the safety of India's women

India’s new budget is courting controversy after $33 million was earmarked for a statue of national icon Sardar Vallabhbhai Patel, but only $25 million for women’s safety and $16.5 million for the education of young girls.

The iron-and-bronze structure, to be erected in new Prime Minister Narendra Modi’s home state of Gujarat, will stand at 182 m tall — twice New York’s Statue of Liberty — and so become the new tallest statue in the world.

However, the project would appear an odd priority for a nation battling rising inflation, a sluggish economy and quickly gaining a reputation as the rape capital of the world. “It is surprising,” says Mumbai-based author Chandrima Pal. “Especially since one of Modi’s key poll pegs was security for women and he ran a massive campaign around that.”

The total cost of immortalizing Patel, who was Home Minister in the government of India’s first Prime Minister, Jawaharlal Nehru, is estimated at some $338 million, the rest to be filled by donations and private-sector investment.

But public opposition to the statue is growing — the project was rated “most disliked” on the website of NDTV news channel, and the Times of India newspaper started a social-media survey asking the loaded question of whether the project was “wasteful expenditure.” Mayank Jain, a youth activist and a finance student in the capital, New Delhi, decried a “complete failure of prioritization.”

The Modi government, though, would appear unmoved. Despite the uproar, Finance Minister Arun Jaitley said during a postbudget chitchat with NDTV that he had “absolutely no regrets.”

TIME Sri Lanka

Hundreds of Tamils Have Simply Vanished on the Perilous Sea Voyage to Australia

Australian Navy boat comes alongside a boat carrying 50 asylum seekers after it arrived at Flying Fish Cove on Christmas Island
An Australian navy boat, front left, comes alongside a boat carrying 50 asylum seekers after it arrived at Flying Fish Cove on Christmas Island, about 2,600 km (1,600 miles) northwest of Perth, on Aug. 7, 2011. © Stringer Australia / Reuters—REUTERS

According to one eerie estimate, 800 asylum seekers — men, women and children — have set off for Australia in the past three years and have simply never been heard from again

Antonyamma, a Tamil refugee from Sri Lanka living in the South Indian state of Tamil Nadu, last heard from her daughter Mary more than a year ago when the younger woman had boarded a boat heading for Australia, along with seven other members of her family, including four children aged under 9.

In total, 63 people from their community were on the same boat, which left the Indian port of Kochi on May 1, 2013. None have been heard from since.

“They didn’t tell me they were going until they were on the boat, because they knew I’d stop them,” said Antonyamma, in between sobs, on the phone from her home in the city of Madurai.

One rights group — the Adventist Development and Relief Agency (ADRA), which works extensively with Sri Lankan Tamils in India — estimates that 800 asylum seekers have disappeared over a three-year period, while trying to travel from South India to Australia by sea. It’s an appalling and largely unpublicized figure, if true.

Most of those who make the perilous journey have lived in India for years, having fled the decades-long Sri Lankan civil war, which ended in 2009, or the persecution of Tamils that persists in the war’s aftermath. However, while they are free from violence in India, they mostly live below the poverty line and are denied citizenship rights. The desperate hope of a new life is what drives them to pay exorbitant fees — around $2,500 — to smugglers who promise them safe passage to Australia and who vow that, after a year or two in a detention camp, they will be free to gain Australian citizenship.

However, successive Australian governments have taken a hard-line approach to asylum seekers. While arrival numbers are relatively small by international standards, it’s a stance that wins favor from voters.

Last week, the conservative Australian government returned, for the first time, a boatload of Tamil asylum seekers to Sri Lanka, even though the vessel had sailed from India, and even though the asylum seekers could face imprisonment or even torture upon arrival.

A second boatload, said to be carrying 153 people, is now in limbo on the high seas because Australia’s High Court has imposed an interim injunction against the repatriation of any more asylum seekers until the matter can be heard fully by the court. Lawyers acting on behalf of the 153 argue that the Australian government will be in breach of international law if it returns refugees to Sri Lanka.

“There’s no authentic data, but we’re told that people [who return to Sri Lanka] are put in prison,” says Valan Satchithananada, the Chennai-based project director of ADRA.

Based on sources inside India’s refugee camps, ADRA claims up to 1,000 Tamils have set sail to Australia from India since 2009. Of those, only 120 have been heard from.

“Everyone desperately wants to know what’s happened to all those hundreds of people who have left India and disappeared,” says Satchithananada.

The UNHCR’s Indian office provides a much lower figure, saying that deaths by drowning are hard to verify. “We have received around 40 representations on missing Sri Lankan refugees, and these have been forwarded to the International Committee of the Red Cross,” its spokesperson stated.

The Indian Red Cross says that according to its records, 110 people are missing. However, it admits that its figures are based on inquiries in just 35 of Tamil Nadu’s 112 refugee camps.

There are suspicions that some of the missing might be in the hands of Somali pirates, as family members have received calls from Somali phone numbers. “We’re taking the claims seriously and investigating with support from the Red Cross in Somalia and Kenya,” says Red Cross tracing officer Nagarajan Krishnamoorthy.

Many family members, however, will never hear anything. Senthura Selvan hasn’t seen her elder sister Mayura since the 26-year-old classical-dance teacher boarded a boat in Chennai bound for Australia in September 2012. Their brother sailed on a separate boat and is now in Australian detention. But nothing has been heard from Mayura, Senthura says.

“We could have eaten just kanji [rice gruel] but stayed happy in India, all together,” said her mother, who declined to give her name. “Bring my kids back. Please, bring my kids back.”

TIME India

India’s Modi (Barely) Passes His First Big Test on Economic Reform

Indian PM Modi walks in front of a picture of former Indian PM Vajpayee after a news conference in New Delhi
Indian Prime Minister Narendra Modi walks in front of a picture of former Indian Prime Minister Atal Bihari Vajpayee after a news conference in New Delhi on July 9, 2014. Anindito Mukherjee—Reuters

The new Prime Minister indicated change will come in steps, not all at once

Narendra Modi and his Bharatiya Janata Party (BJP) rode into office in May on a tidal wave of support created by hopes he would revive India’s stumbling economy. India, once one of the world’s best-performing emerging economies, has witnessed growth shrink under 5% — too low to rescue the hundreds of millions of countrymen still trapped in desperate poverty. Business leaders have had high expectations that Modi would push ahead with the long-stalled but painful reforms necessary to restart the country’s economic miracle.

In his first major policy pronouncement, however, Modi indicated change would come — but slowly. On Thursday, Modi’s Finance Minister, Arun Jaitley, presented the new government’s budget in Parliament in New Delhi. Indian budgets are considered a bellwether for the direction of economic policy. What emerged was a very gradualist approach, with some encouraging tidbits, but no signs Modi is in a big rush to remake the Indian economy. In his speech, Jaitley said the budget was “only the beginning of a journey” to bring growth back up to 7% to 8% over the next three to four years. “It would not be wise to expect everything that can be done or must be done to be in the first budget,” he said.

Investors got some items on their wish list. The government pledged to open the defense and insurance industries wider to foreign investors, bring down the budget deficit more rapidly, press ahead with much needed tax reform, improve the country’s inadequate infrastructure and support manufacturing to create more jobs. Jaitley also promised an overhaul of costly food and fuel subsidies, which are a huge burden on the strained budget, to make them “more targeted” on the most needy.

Yet for a government that has pledged to control spending and unleash the country’s growth potential, the budget was still puffed up with plenty of populist pork. The budget reiterated Modi’s campaign pledge to provide toilets for all. Jaitley also decided to maintain the previous administration’s expensive and controversial program to guarantee jobs for rural workers, though he suggested its oversight would be strengthened to ensure funds got utilized more wisely. On other issues, Jaitley seemed to fudge a bit. Widely criticized efforts by the previous government to impose retrospective taxes scared foreign investors, and though Jaitley said the Modi administration would limit any such taxes and “provide a stable and predictable taxation regime that would be investor-friendly,” he didn’t emphatically close the door on them, either.

The most disappointing aspect of the Modi budget is that it was no bold statement that a new era of economic policy was coming. Details on many of Jaitley’s proposals were sparse. For example, he did offer many specifics on such key issues as reducing subsidies. Other important reforms weren’t addressed, such as loosening up the country’s restrictive labor laws, which hurt job creation. “Nothing that was announced today marks this government out as being significantly different from the last,” complained Mark Williams, chief Asia economist at research firm Capital Economics. “If market enthusiasm for Mr. Modi’s government is to be sustained, that will have to change.”

Ultimately, though, Modi’s incremental methods may be simply good politics. Even though Modi scored a landslide victory in the last election, many of the reforms most critical to the economy are certain to face stiff opposition. If he charges ahead too quickly, his entire reform effort could get derailed. Modi has already been forced to reverse course on one of his initial reforms. In late June, Modi partially rolled back a hike in train fares aimed at putting the strapped railway system on a stronger financial footing after protests erupted and the BJP’s political allies objected.

At the same time, Modi has to play a delicate political game. If he moves too slowly on reform, growth won’t improve, and his support could suffer. Fixing India’s economy will take a huge amount of political will. We’re still waiting to see if Modi has it.

TIME India

More Children Are Going to School in India, but They’re Learning Less

INDIA-EDUCATION-TUITION
An Indian teacher assists underprivileged children during their lessons at Palodia village of Gandhinagar district, some 25 kms from Ahmedabad on November 21, 2013. Sam Panthaky—AFP/Getty Images

India's woeful state schools are in stark contrast to the country's lofty goals of becoming a nation of call centers and technology parks

The fifth-grade boys and girls at school in Sultanpur — a village about 40 km from the Indian capital, New Delhi — are laboring over their lessons on a Friday morning. Eleven-year-old Kiran alternates between chewing her pencil and copying the English text that was the morning’s task. She writes down the sentences, arduously capitalizing the first letter of every word. The children have not yet grasped the basics of English grammar, the teacher explains. But they should have – at least three grades earlier.

“I cannot read English very well,” Kiran mumbles, keeping her eyes firmly fixed on the ground. She adds as an afterthought, “I know my tables till 20 in Hindi though.”

As a new World Bank study has found, there’s a literacy problem in Indian schools, and not just in English. A third of all grade-three students can’t read at all in their native language. Roughly half of all grade-five students cannot manage a grade-two text, which is also too difficult for a quarter of all seventh-grade pupils.

This decline in standards, experts say, is paradoxically because of the rush to build schools and bring back children to the education fold. India managed to bring down the number of out-of-school children from 32 million in 2001 to 1.4 million in 2011 as part of a program to make elementary education universal. The landmark Right to Education Act of 2009 guarantees every child in India between the ages of 6 and 14 free education at a neighborhood school.

And yet, amid this headlong drive, little attention has been paid to what children are learning in classrooms or how well. Absenteeism (the World Bank study pegs average attendance to be at least 15% to 30% lower than enrollment rates) and misconduct (recently, about 20,000 teachers were found to have forged their degrees in the eastern Indian state of Bihar) are big contributors to poor standards of education. “India will have to invest more, starting with pre-service teacher education and professional development of teachers,” says Poonam Batra, a professor in the education department at the University of Delhi and a member of the Justice Verma commission, which has suggested sweeping reforms in the education sector.

All this is in stark contrast to India’s lofty goals of becoming a nation of call centers and technology parks, and to the image it enjoys overseas as a powerhouse of learning, turning out English-speaking engineering and science graduates by the tens of thousands. Despite the fact that private schools, promising world-class education in English, have been mushrooming in the country over the past few years, standards of English are also on the wane. “The average Indian adult cannot yet write business letters in English or speak spontaneously at a business meeting in English,” Minh N. Tran, director of research and academic partnerships at Education First, tells TIME.

Enrollment in private schools in rural India increased from 19% in 2006 to 29% in 2013. In urban India it was about 58% in 2005 and likely to be much higher now. But it is in the state sector that the real battle must be fought. “Countries that have done well economically have had robust state schools and teacher-education systems,” says Batra.

New Delhi has raised government spending on education from 3.3% of GDP in 2004–05 to 4% in 2011–12 (China spends about the same, but Brazil and Russia are well ahead). But facilities remain woeful. In Indian state schools, children have to sit on the floor until they reach grade six. “My feet goes off to sleep sometimes, and I lose track of the class,” says Kiran. “A desk and a chair would be very nice.” For most Indian children, the battles are that basic.

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