Daily Current affairs 17 January 2019UPSC - Daily Current Affair
- The European Union withdrawal deal/Brexit deal proposed by Prime Minister Theresa May was defeated in the UK Parliament.
Background of Brexit
- Brexit is a word that is used as a shorthand way of saying the UK leaving the EU - merging the words Britain and exit to get Brexit.
- A referendum for Brexit was held on in 2016 to decide whether the UK should leave or remain in the European Union.
- 9% people voted in favour of Leave and won.
The Brexit Process:
- To leave the EU, UK had invoked Article 50 of the Lisbon Treaty which gives the two sides two years to agree on the terms of the split.
- The UK triggered this process on 29 March, 2017, meaning the UK is scheduled to leave EU on 29 March 2019.
- After months of negotiation since 29th march 2017, the UK and EU came up with a withdrawal agreement, which was signed in November, 2018.
- Now, it was for the UK parliament to pass (approve) the deal before the due date to leave the EU.
Brexit deal was rejected by the UK Parliament
- The Brexit deal (or the withdrawal deal) proposed by PM Theresa May, which contained the terms under which Britain should leave the EU on March 29 this year, was rejected.
- On the backdrop of rej ection of the Brexit deal, the British government faced a no-confidence motion in the parliament (which was defeated).
- The situation has become confusing regarding the future of the Brexit, which has pushed the country into uncertainties.
- The following are the possibilities for the future of Brexit deal.
Possibility 1: Renegotiate the deal
- May could try to negotiate with the Labour party, and perhaps agree to its plan for a customs union with the EU.
- The PM could renegotiate the deal with the EU for some concessions, which he/she could take back to the parliamentarians in a renewed bid to get the deal passed.
- She could also seek for extension/ Postponement of the Brexit.
- Risks associated:
- EU has already cleared that the deal would not be renegotiated.
- Even if EU agrees for little concessions, it is not guaranteed that UK parliamentarians would satisfy with that.
- Moreover, any renegotiated deal or postponement agreement has to be signed by all 27 member countries, which is again difficult to achieve given the few days left for Brexit.
Possibility 2: Fresh referendum
- Some suggest there could be an option to conduct fresh referendum.
- A second referendum could be the only way to persuade the EU side to agree to extend the deadline for Brexit.
- With less than 75 days to go, this option looks like the only way of avoiding a Brexit with no-deal.
- Risks associated:
- If a fresh referendum has to be conducted, the parliament will have to consent to this.
- However, as of now, this option does not have a support of the majority in Parliament.
Situation 3: General Election
- Despite winning the no-confidence vote, May could still call for an election in the hope of getting a bigger majority that would help pass her the deal.
- Risks associated:
- She did play on this option last year and suffered a setback instead.
- It is possible that this time, she could be even defeated.
Situation 4: No deal Brexit
- The current deal has been defeated. If the PM could not find any other alternative, and if does not seeks for extension of Brexit, Britain has to leave the EU without a deal on March 29.
- There is optimism that no deal exit would not be case, as a large majority in Parliament is against leaving without a deal.
- Risks associated:
- If Parliament could not find a way out of the crisis, chaos could follow.
- Britain may have to get into messy negotiations to strike deals with all EU nations individually.
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Section : International Relation
- The Pantagon has released its latest report on “China’s global expansion by military and non-military means”.
- The report assesses China’s global expansion by military and nonmilitary means, and implications of China’s activities.
The Pentagon: The Pentagon is the headquarters of the United States Department of Defense. The Pentagon is often used as a metonym (a word that denotes one thing but refers to a related thing) for the U.S. Department of Defense and its leadership.
China's Global Expansion :
- China has established its first overseas naval base at Djibouti in the Horn of Africa in August 2017. This also hosts marines, infantry combat vehicles and helicopters.
- To enhance its strategic footprint and emerge as the pre-eminent power in the crucial Indo-Pacific region, China is now looking at Pakistan, Cambodia, Vanuatu and other countries for additional military bases.
- China has become the world’s fifth largest arms supplier by completing over $20 billion of military sales and transfers between 2012 and 2016.
- China's One Belt, One Road (OBOR) initiative, which at first included economic initiatives in Asia, South Asia, Africa, and Europe, now encompasses all regions of the world, including the Arctic and Latin America.
- China is also using its OBOR and Digital Silk Road initiatives to shape its strategic interests in the Indian Ocean, Mediterranean Sea, and Atlantic Ocean.
- China is also pursuing global leadership in strategic industries through “Made in China 2025” industrial strategy, and other national documents.
- These bases, and other improvements will increase China’s ability to deter the use of conventional military force, sustain operations abroad, and hold strategic economic corridors at risk.
- Initiatives like OBOR and Silk Road can develop strong economic ties with other countries and can shape their interests to align with China’s approach or stance on sensitive issues.
- China’s wider global activities could also be leveraged to exert political influence.
- India has also made military logistics pacts to allow its warships access to US bases in Djibouti, Diego Garcia, Guam and Subic Bay as well as French ones in the Reunion Islands (near Madagascar) and Djibouti, but they are not fully operational as of now.
- Moreover, the plan to set up military bases in Duqm (Oman), Changi (Singapore), Assumption Island (Seychelles) and Sabang (Indonesia) are still some distance away from being realized.
- To counter China's influence India must keep a cautious eye on china's growing economic and military influence and presence.
- India needs to get its act together in the Indian Ocean Region.
- The Quad (U.S, Japan, Australia and India )will also be the most important grouping in the Indo-Pacific.
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Section : Defence & Security
- Recently, the Central Statistics Office (CSO) has released “Index of Industrial Production (IIP)”.
What is IIP?
- IIP is an index detailing out the growth of various sectors in an economy such as mineral mining, electricity and manufacturing.
- It is a short term indicator of industrial growth till the results from Annual Survey of Industries (ASI) and National Accounts Statistics (Example: GDP) are available.
- It measures the changes in the volume of production of a basket of industrial products during a given period with respect to the volume of production in a chosen base period.
- The base year for the current series of IIP is 2011-12.
Note: Base Year is an year used as the beginning or the reference year for constructing an index, and which is usually assigned an arbitrary value of 100.
Who releases IIP?
- It is compiled and published by the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation.
- It is published monthly with a time lag of six weeks from the reference month
Significance of IIP
- It is used by government agencies including the Ministry of Finance, the Reserve Bank of India etc, for policy purposes.
- The all-India IIP is a crucial input for compilation of Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.
- It is also used extensively by financial intermediaries, policy analysts and private companies for various analytical purposes.
- It is crucial considering the IIP is the only measure on the physical volume of production.
Change in base year
- In 2017, the change in the base year was done to 2011-12.
- The previous changes in base years were done in 1937, 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.
Does a change in base year makes a significant changes to the IIP growth figures?
- A change in the base year does not end up making too much difference to the IIP growth figures.However, the bigger impact is on account of the difference in the constituent items of the index and weights assigned to each of them.
Difference between Annual Survey of Industries (ASI) and Index of Industrial Production (IIP):
Both the ASI and IIP are used to capture and monitor the Industrial Output data. However, there are following differences among the two
- ASI is calculated on an annual basis
- ASI is a record-based survey of establishments registered under the Factories Act, 1948 in which the sampling frame and the sampled establishments undergo significant changes.
- It is conducted under the Collection of Statistics Act, since 1959.
- Objective is to obtain comprehensive and detailed statistics of industrial sector for estimating the contribution of registered manufacturing industries as a whole to the national income.
- ASI data is based on the actual book of accounts and other documents maintained by registered factories.
- Growth rates in ASI are derived on the basis of Value Added (Output – Input).
- The ASI captures information of new items and factories (whereas the IIP does not).
- ASI establishments cover both large and smaller units
- IIP is calculated on a monthly basis.
- IIP is based on a fixed set of items and factories chosen in the base period
- Data for IIP are collected by various source agencies under different Acts/statutes.
- It is compiled on the basis of data sourced from 16 ministries/ administrative departments.
- Growth rates in IIP are based on volume of production.
- The IIP is based on a much smaller sample of factories as compared to that of ASI.
- Establishments selected in IIP are generally larger in size
Therefore, the growth rates in IIP are lower as the smaller units that have a thinner base and hence show higher growth.
Manufacturing sector in India
Steps to boost manufacturing
- National Manufacturing Competitiveness Council (NMCC): It has been set up by the Government to provide a continuing forum for policy dialogue to energise and sustain the growth of manufacturing industries in India.
- Make in India Initiative.
- National Investment and Manufacturing Zones (NIMZs).
- Skill India
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Section : Economics
- The Eat-Lancet Commission has released a global healthy diet plan for the growing global population and for sustainable food systems that will minimise damage to our planet.
- According to the commission, the current food systems of the world are not only faulty but also a major contributor to climate change.
- According to estimates, globally more than 800 million people suffer from hunger.
- Further, almost 2 billion people are consuming faulty unhealthy diet accounting for up to 11 million avoidable deaths per year.
- Besides, being nutritionally sub-optimal, the dominant diets of the past 50 years in the world are also contributing significantly to climate change.
- Further, food is the single strongest lever to optimise human health and environmental sustainability on Earth.
- Thus, the Eat-Lancet commission has recommended a healthy diet plan that is both nutritionally optimal and planetarily safe.
- Further, the new diet could avert 10.9-11.6 million premature deaths a year.
Planetary Healthy Diet Plan of EAT-Lancet Commission
- The Planetary diet Plan includes 2 aspects including healthy diet plan and safe food systems.
Healthy Diet Plan
- Basic characteristics of a healthy diet plan include a dramatic reduction in the consumption of meat and dairy and a sharp increase in plant-based foods.
- High amount of vegetables, fruits, whole grains, legumes, nuts, and unsaturated oils, with very moderate amounts of seafood and poultry.
- No or very low quantities of red meat, processed meat, added sugars, refined grains and starchy vegetables.
- The daily requirement of an average adult of 2500 calories should involve
- 800 calories from whole grain (rice, wheat or corn)
- 204 calories from fruits and vegetables
- 30 calories from red meat (beef, lamb or pork).
Safe Food Systems
- Apart from optimal nutrition plan, safe food systems should involve sustainable food production that are characterized by
- No usage of additional land
- Safeguard existing biodiversity
- Reduce consumptive water use.
- Substantially reduce nitrogen and phosphorus pollution
- Produce zero carbon dioxide emissions,
- Check the increase in methane and nitrous oxide emissions.
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Section : Social Issues
- In order to insulate the top police chiefs from the pulls and pressures of the political executive, the Supreme Court reaffirmed that the appointment of Director Generals of Police in states should be in accordance with the recommendation of UPSC.
- Recently, 5 states including Punjab, Kerala, West Bengal, Haryana and Bihar had filed petitions in the Supreme Court urging it to modify its order relating to appointment of state police chiefs.
- The aforesaid states have been urging to be allowed to implement their own local laws for selection and appointment of their State police chiefs citing local reasons.
Appointment of DGP
- The State government prepares a list of names of probables for the position of DGP.
- This list is then sent to UPSC three months prior to the retirement of the incumbent DGP.
- The UPSC then shortlists a panel of three officers giving due weightage to merit and seniority.
- The State is to then “immediately” appoint one of the persons shortlisted by the UPSC.
- Various states have brought in laws which are at variance with the procedure at various times citing local conditions.
- Punjab, Kerala and Bihar have passed laws in contrast to the procedure citing own state conditions.
- Further, the states also appoint ‘Acting DGPs’ in the states.
- Some states do not follow the fixed-tenure rule of 2 years.
- Further, some states have appointed officers as DGP on the date of their retirement so that they would continue to serve for another two years till the age of 62.
Highlights of the Ruling
- The apex court has laid down a procedure that states would have to follow while appointing state police chiefs.
- It also gives for a fixed minimum tenure rule.
- The Court has directed the states to allow the DGP appointed to continue in office despite his or her date of superannuation only for a “reasonable period”.
- The apex court has ordered the states to discontinue the practice of appointing “Acting DGPs”.
- Further, it has kept at abeyance any rule or state law on the subject of appointment of police officers.
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Section : Defence & Security
Interim budget in February:
- The current central government will present its last budget on 1 February.
- It will be an interim rather than a full budget. The interim budget will likely be the last macroeconomic policy statement by this government before the 2019 Lok Sabha elections.
Situation before 2014:
- The present government took office at a time when the Indian economy was still recovering from the macroeconomic policy errors of its predecessor.
- High inflation, high fiscal deficits and high current account gaps had led to a run on the rupee in the middle of 2013.
- It was only then that efforts were made to tighten policy and the Reserve Bank of India (RBI) had also begun to increase interest rates.
Looking back at the macro strategy over the past 5 years:
- This is a good time to look back at the macro strategy (and not the economic reforms record) over the past five years.
- The focus was on fiscal discipline.
- The Indian central bank was also given a formal inflation target.
Strengthening public finances using the fall in global oil prices:
- Global oil prices collapsed in the dying months of 2014.
- India got an economic boost from this positive shock to its terms of trade with the rest of the world.
- The government used this opportunity to strengthen public finances through tax hikes on fuel.
- The improvement in net exports provided a temporary boost to economic growth.
- The RBI was also focused on its stiff inflation target.
- Headline inflation halved over the tenure of the Modi government.
- Hikes in minimum support prices were modest till 2018.
- Indian inflation is now closer to global inflation.
Overall the macro stabilisation worked:
- India is in a far better place today than it was six years ago if one looks at the three main indications of economic stability—
- Fiscal deficit
- Current account gap
- Critics say recent macro economic measures negatively impacted growth rate:
- There is no shortage of critics of the economic policy pursues over the last 5 years.
- They argue that India needed some combination of higher fiscal deficit and lower interest rates to push economic growth.
- But this policy was forced by the poor state of economy by 2014:
- The policy choices over the last 5 years have to be seen against the backdrop of what happened prior to 2014.
- By 2014, India's growth story got so muddled that India was seen as one of the fragile five(five most fragile emerging market economies).
- The focus on macro stability was welcome.
But structural issues remain in the economy:
The more persistent worries for Indian economy are structural.
- Fiscal Deficit: The combined fiscal deficit is inching up.
- Investment: Corporate investment seems to be recovering but is still weak.
- There were also deeper challenges to be addressed.
- India was depending too heavily on private consumer spending.
- Corporate investment had fallen off a cliff because of excess capacity, balance sheet stress and weak banks.
- Economists had argued that the government needed to boost public investment to fill the gap created by weak private investment.
- The oil bonanza had provided the fiscal resources, but public investment did not take off in a big way.
- Private investment continued to struggle.
- Savings: The savings rate is too low to support a robust investment recovery.
- The sharp decline in the domestic investment rate helped reduce the current account deficit (which can also be read as the difference between domestic investment and domestic savings).
- The improvement in the current account masked the fact that the domestic savings rate has drifted down over the past decade.
- There could be external stress in case investment cycle turns without an improvement in the savings rate.
- Exports: Export growth is sluggish despite the recent synchronized recovery in major global economies.
- A narrowing trade gap combined with strong capital inflows pushed up the rupee, despite dollar buying by RBI.
- The overvaluation of the rupee was one reason why exports stagnated.
- Foreign demand for Indian goods was not strong enough to balance weak domestic demand.
- There was an opportunity after world trade began to recover in early 2018, but that was just when Indian supply chains were disrupted because of demonetisation followed by the transition to the goods and services tax (GST).
- Capital with banks: The bad loans crisis may have peaked, but banks will need a lot of capital.
- Twin balance sheet problem:
- There was not enough done to deal with the twin balance sheet problem.
- Twin balance sheet problem refers to the problematic balance sheets of Indian companies and banks—meaning, both the lenders and borrowers are under stress.
- Companies have too much debt and little money to repay.
- Banks are under stress due to rising NPAs and they are unable to issue fresh loans.
- Twin balance sheet problem:
Growth rate needs to be higher:
- The growth rate that can be sustained without macro instability is still below its level a decade ago.
- India is one of the best performing major economies in the world.
- The question is whether that is enough to create the income growth as well as jobs needed for a stronger assault on poverty.
- The Indian economy is far more stable than it was when nearly five years ago.
- Yet, some of the deeper structural challenges to economic growth are still present.
GS Paper III: Economy
Section : Editorial Analysis
There are five pillars of the skills ecosystem:
- Secondary schools/polytechnics
- Industrial training institutes
- National Skill Development Corporation (NSDC)-funded private training providers offering short-term training
- 16 Ministries providing mostly short-term training
- Employers offering enterprise-based training
National Skills Qualification Framework (NSQF):
- In 2013, India’s skill agenda got a push when the government introduced the National Skills Qualification Framework (NSQF).
Organizes qualifications in various levels:
- This organises all qualifications according to a series of levels of knowledge, skills and aptitude (just like classes in general academic education).
- For instance, level 1 corresponds to Class 9 (because vocational education is only supposed to begin in secondary school in many countries, including India).
- Levels 1, 2, 3 and 4 correspond to Classes 9, 10, 11 and 12, respectively.
- Levels 5-7 correspond to undergraduate education, and so on.
- For each trade/occupation or professional qualification, course content should be prepared that corresponds to higher and higher level of professional knowledge and practical experience.
All to be compliant to NSQF by 2018:
- The framework was to be implemented by December 27, 2018.
- The Ministry of Skill Development and Entrepreneurship (MSDE) mandated that all training/educational programmes/courses be NSQF-compliant.
- Also, all training and educational institutions were mandated to define eligibility criteria for admission to various courses in terms of NSQF levels.
Assessing its effectiveness
- We can look at NSQF implementation through the prism of national skill competitions, or India Skills.
India Skills 2018:
- India Skills is a national skill competition, an initiative of the Ministry of Skill Development and Entrepreneurship (MSDE).
- 27 States participated in India Skills 2018, held in Delhi.
- Maharashtra led the medals tally, followed by Odisha and Delhi.
- Abilympics was also included in India Skills 2018, for Persons with Disabilities.
Winners will participate in World Skills Competition:
- Now, teams will be selected to represent India at the 45th World Skills Competition, scheduled in Russia in 2019.
- World Skills holds competitions in construction and building technology, transportation and logistics, manufacturing and engineering technology, information and communication technology, creative arts and fashion, and social and personal services.
Lessons from the competition:
- The India Skills competition has provided evidence that many reforms are critical and urgent.
- There are two priorities requiring action before the next round of India Skills is held.
- NSQF not widely accepted:
- India Skills was open to government industrial training institutes (ITIs), engineering colleges, Skill India schemes, corporates, government colleges, and school dropouts.
- Skill India is understood to mean courses that are compliant with the NSQF.
- But a majority of the participants were from corporates (offering enterprise-based training) and ITIs; Neither ITIs nor corporates’ courses are aligned with the NSQF.
- If India Skills 2018 was only open for the NSQF-aligned institutions, it would have been a big failure.
- This indicates that the NSQF has not been well accepted or adopted across India.
- Reason - curriculum does not mandate progression of courses:
- In general academic education, completion of certain levels of certification is required before further progression is permitted.
- However, there is no clear definition of the course curriculum within the NSQF that enables upward mobility.
- Prior real knowledge of theory or practical experience in a vocational field is not mandatory for the tertiary level vocational courses.
- This is making alignment with the NSQF meaningless.
- Lack of alignment between HRD and Skill Development ministries:
- Efforts to introduce new Bachelor of Vocation and Bachelor of Skills courses were made, but the alignment of these UGC-approved Bachelor of Vocation courses was half-hearted.
- There is no real alignment between the Human Resource Development Ministry (responsible for the school level and Bachelor of Vocation courses) and the Ministry of Skill Development (responsible for non-school/non-university-related vocational courses).
- Too many councils:
- We must also reduce complications caused by too many Sector Skill Councils (SSCs)anchoring skill courses.
- Case of manufacturing:
- We have four SSCs for manufacturing: iron and steel, strategic manufacturing, capital goods, and, infrastructure equipment.
- However, these are treated as one in World Skills courses.
- Even in India, there should be just one SSC called the Machinery and Equipment Manufacturing Council, in line with the National Industrial Classification of India.
- Similarly, there is no reason to have four SSCs (instead of one) each of textile, apparel made-ups and home furnishing, leather and handicrafts.
- Skilling should be done for broader occupational groups that narrower:
- It was a mistake to create 40 SSCs. Outcomes have shown that they have been ineffective.
- Most of their NSDC-SSC- approved training does not produce students who can showcase “holistic” skills for broad occupational groups in such competitions.
- If we want Skill India trainees to win international competitions and if we want competitors to come from schemes of the Ministry, we must find a way to provide broader skills in broader occupational groups.
- There is a need for more holistic training and to re-examine the narrow, short-term NSQF-based NSDC courses to include skills in broader occupation groups, so that trainees are skilled enough to compete at the international level.
- Sectors should be consolidated:
- Sectors should be consolidated in line with the National Industrial Classification of India.
- This will improve quality, ensure better outcomes, strengthen the ecosystem, and help in directly assessing the trainee’s competence.
- It might also bring some coherence to our skills data collection system.
- India could learn a lesson from Germany, which imparts skills in just 340 occupation groups.
- Vocational education must be imparted in broadly defined occupational skills, so that if job descriptions change over a youth’s career, he/she is able to adapt to changing technologies and changing job roles.
- Skill India needs a sharp realignment, if India is to perform well in the World Skills competition later this year.
GS Paper III: Economy
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Section : Editorial Analysis
BRICS, an acronym, is used for the combined economies of Brazil, Russia, India, China and South Africa.
Evolution of BRICS
- In 2001, an economist at Goldman Sachs named Jim O'Neill, originally coined the term BRIC for Brazil, Russia, India and China based on the growth prospects for the economies and projected that they would be among the world's largest economies in the next 50 years or so.
- As a formal grouping, BRIC started after the meeting of the leaders of Russia, India and China in St. Petersburg on the margins of G8-Outreach Summit in July 2006.
- The grouping was formalized during the 1st meeting of BRIC Foreign Ministers on the margins of UNGA in New York in September 2006.
- 1st Summit - Originally known as BRIC, the first summit was held in Russia (Yekaterinburg) in June 2009. Since 2009, BRICS summit has been an annual event.
- 2nd BRIC Summit - 2010 in Brazil (Brasilia)
- 3rd BRICS Summit - 2011 in China (Sanya) - A decision was taken to include South Africa in 2010 and it subsequently attended the 2011 summit in Sanya, China, completing the grouping which since then has been referred to as BRICS.
- 4th BRICS Summit - 2012 in India (New Delhi)
- The 10th BRICS Summit was held at Johannesburg in South Africa in 2018.
- The 11th summit will take place in Brazil in 2019.
BRICS brings together five major emerging economies, comprising (as of 2016):
- 43% of the world population
- 37% of the world GDP
- 17% share in the world trade
- 25.9 per cent of world’s geographic area
- 45 per cent of the increase in world growth since 2009 (driven mainly by China and India)
The BRICS agenda started essentially with economic issues of mutual interest. However, the agenda of BRICS meetings has considerably widened over the years to encompass topical global issues such as international terrorism, climate change, food and energy security, international economic and financial situation, reform of the Bretton Woods Institutions, trade protectionism and the WTO/Doha Development Round etc.
Cooperation in economic-financial sphere:
The economic-financial sphere stands out as one of the most promising areas of activity for the BRICS. Two instruments of special importance were signed at the VI BRICS Summit (Fortaleza, Brazil, 2014) regarding:
- The New Development Bank (NDB)
- The Contingent Reserves Arrangement (CRA)
- New Development Bank (NDB)
- It is also known as BRICS Development Bank.
- It is headquartered at Shanghai, China.
- The NDB will mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.
- Contingent Reserve Arrangement (CRA)
- So far IMF support is the primary safety net available in case any BOP crisis situation arises. The BRICS Contingent Reserve Arrangement (CRA) would contribute to strengthening the global financial safety net by complement existing international arrangements (from IMF).
- The BRICS CRA will help India and other signatory countries to prevent short-term liquidity pressures (by boosting access to additional foreign exchange reserves) in situations of instability in the balance of payments, provide mutual support and further strengthen financial stability.
- The initial total committed resources of the CRA was $ 100 Billion (China contributing $ 41B, South Africa $ 5B while India, Russia and Brazil $ 18B each).
As BRICS cooperation grew to consolidate its foundation and expanded to more areas, it developed a multi-level process led by the Summit, meetings of the national Security Advisors, Foreign Ministers and other ministerial meetings. BRICS cooperation has two pillars:
- Consultation on issues of mutual interest - through meetings of Leaders as well as of Ministers of Finance, Trade, Health, S&T, Agriculture, etc.
- Practical cooperation in a number of areas - through meetings of Working Groups/Senior Officials.
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Section : International Relation