Question #
India has recently signed to become founding member of New Development Bank (NDB) and also the Asian Infrastructure Bank (AIIB). How will the role of the two Banks be different? Discuss the strategic significance of these two Banks for India.
Answer by Chad #
The New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB) are both multilateral development banks, but they differ in their structure and focus.
1. Structure:
- NDB: The NDB was established in 2014 by the BRICS countries (Brazil, Russia, India, China, and South Africa) to finance infrastructure and sustainable development projects in emerging economies. It has equal voting rights among its members and follows a democratic decision-making process.
- AIIB: The AIIB was established in 2016 and has a broader membership of over 100 countries, including major global economies. Its structure is based on shareholding, where voting rights are weighted based on the country's economic size. China has the largest share, followed by India and other countries.
2. Focus:
- NDB: The NDB focuses on financing infrastructure and sustainable development projects in BRICS and other developing countries. It aims to support projects that promote economic growth, social progress, and environmental sustainability.
- AIIB: The AIIB's focus is to fill the infrastructure financing gap in Asia by providing loans and equity investments for projects that promote regional connectivity, sustainable development, and poverty reduction across member countries.
Strategic significance of NDB and AIIB for India:
1. Infrastructure Development: Both banks offer significant opportunities for India to access funds for infrastructure development. With its massive infrastructure needs, India can benefit from the financial assistance provided by these banks to modernize its transportation, energy, and urban infrastructure.
2. Economic Growth: Access to financing from NDB and AIIB can accelerate India's economic growth by addressing infrastructure bottlenecks, improving connectivity, and supporting sustainable development projects.
3. Enhanced Regional Cooperation: As a founding member of both banks, India secures a stronger role in regional economic development and deepens its cooperation with other member countries, especially within the BRICS framework. This enhances India's standing as a global economic player.
4. Diversification of Financing Sources: Membership in these banks allows India to diversify its sources of funding for infrastructure projects, reducing its dependency on traditional funding institutions like the World Bank and Asian Development Bank.
5. Influence in Decision-making: As a significant shareholder and founding member, India gains influence in the decision-making processes of both NDB and AIIB. This ensures that Indian priorities and perspectives are represented in bank policies, project selection, and lending criteria.
In conclusion, the NDB and AIIB provide India with increased opportunities for infrastructure development, economic growth, and regional cooperation. By being a founding member of both banks, India secures a strategic position to shape the institutions' policies and secure funding for its infrastructure projects.