India to contribute $18 bn to BRICS forex reserves pool

India will contribute USD 18 billion to the forex reserves pool set up by BRICS nations. The USD 100 billion foreign-exchange reserves pool is set up by five nations of the BRICS grouping to help each other “in case of any problems with dollar liquidity“.

The contributions from all five nations are:

• Brazil – $18 billion
• Russia – $18 billion
• India – $18 billion
• China – $41 billion
• South Africa – $5 billion

1. On July 7, 2015, the central banks of Brazil, Russia, India, China and South Africa have signed Operational Agreement in Moscow.
2. The Agreement outlines the terms of mutual support for member states in the framework of the Agreement on BRICS Pool of Conventional Currency Reserves.
3. This fund could be drawn by the member nations if they experience problems with their balance of payments and it will act as an insurance instrument.
4. This agreement will define the working procedure of the pool to be observed by central banks of BRICS nations.
5. The agreement to set up a currency reserve pool was signed during the last year’s BRICS summit in Brazil.
6. The Pool would help BRICS members to maintain financial stability in case of volatility in dollar exchange rate.
7. The BRICS nations account for nearly $16 trillion in GDP and 40 per cent of the world’s population.

BRICS

• BRICS is the acronym for Brazil, Russia, India, China and South Africa. It is an association of five major emerging national economies.
• Initially the group was BRIC and in 2010 South Africa was included.
• BRICS nations represent around 40% of world population
• They have a combined GDP of USD 16.039 trillion equivalent to20% of gross world product.
• The term BRIC was coined by Jim O’Neill then-chairman of Goldman Sachs Asset Management.