The New Development Bank, popularly known as the BRICS bank, established by Brazil, Russia, India, China and South Africa should start work before the end of the year. The bank will be based in Shanghai, but its first chairman is India's Kundapur Vaman Kamath. The importance India attaches to this post is shown by Kamath's prior post as chairman of ICICI Bank, India's largest private lender. The NDB will have US$50 billion in capital and a US$100 billion currency exchange reserve that members can tap in case of balance of payment crises. The BRICS bank is important in itself but also because it is the nucleus of something which, if successfully developed, will be world-changing.

To understand the sheer scale of BRICS, let us compare it to the G7 group of advanced economies. BRICS countries account for over 40 percent of the world's population compared to the G7's 10 percent. BRICS contains four of the 10 countries with the world's largest populations, whereas the G7 contains only one.

Because all BRICS members are developing countries, their market exchange rates undervalue their economies compared to measurements at comparable international prices – Parity Purchasing Powers, or PPPs. But even without correcting for this, the latest IMF projection is that BRICS economies will increase their combined GDPs by US$7.6 trillion at market exchange rates by 2020, compared to US$6.8 trillion for the G7.

This likely understates real development. First, the IMF has a well-documented "optimism bias" regarding the growth of the United States. Since 2007, results have consistently shown that IMF growth projections for the U.S. were too high. Second, the IMF projects that the increase in BRICS countries' GDPs by 2020 measured in PPPs will be US$17.2 trillion compared to US$8.7 trillion for the G7. As countries develop, their market exchange rates tend to adjust upwards closer to PPPs, but the IMF's current calculations for China and India do not take this into account. Even based on conservative IMF calculations, however, the increase in the size of BRICS economies will be greater than the growth of all G7 countries combined.

The crucial point is that the world's two most rapidly growing major economies – China and India – are BRICS countries. Both are growing two to three times faster than the U.S. and four to five times faster than the EU and Japan. Comments in the media that Brazil and Russia have slowed recently therefore miss the point. China and India's development is quite sufficient to maintain BRICS growth, even if other economies within it experience problems.

The BRICS bank's dynamic is also somewhat different from the recently successfully established Asian Infrastructure Investment Bank. The AIIB has over 50 prospective member countries, but these members are at very different levels of development ranging from low income (Bangladesh, Cambodia) to high income (Australia, the United Kingdom, Saudi Arabia). Given this diversity, no new political or economic structures are proposed to be founded on the AIIB. The AIIB is a major financial institution but one with a diverse character.

The BRICS countries, in contrast, are all in reality very large developing economies, even if Russia's per capita GDP of US$24,800 formally qualifies as high income by World Bank standards. But the other BRICS economies are all middle income as measured by global criteria: In PPPs, India's per capita GDP is US$5,900, China's US$12,900, South Africa's US$13,000, and Brazil's US$16,000. This similar development level means that the BRICS economies are not merely very large but also face similar problems, giving the group's coherent and focused interests.

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