UPSC Mains 2014 GS Paper 2 Q19: model answer

In July 2014 BRICS leaders at Fortaleza agreed to set up the New Development Bank; that October India signed as a founding member of the Asian Infrastructure Investment Bank. Both were answers to a World Bank and IMF where emerging economies felt underrepresented.

How they differ

• Membership: the NDB began with the five BRICS countries and has added a few others; the AIIB has over 100 members

worldwide, including many European states.

• Ownership: NDB founders hold equal shares, so no single member dominates; in the AIIB, China is the largest shareholder with an effective veto on key decisions, and India the second-largest.
• Headquarters: NDB in Shanghai; AIIB in Beijing.
• Focus: NDB on infrastructure and sustainable development in emerging economies; AIIB on Asian infrastructure and connectivity.
• Leadership: the NDB's first president was Indian, K.V. Kamath; the AIIB has always been led by a Chinese president.

Strategic role for India

• Finance: India is one of the largest borrowers from both banks, for metro rail, rural roads, water and renewable energy.
• Voice: shaping new institutions rather than waiting for reform of old ones.
• Hedge: alternatives to Western conditional lending.
• Influence in China's project: as the AIIB's second-largest shareholder, India can resist its use for the Belt and Road.

Limits

• China's dominance in the AIIB.
• Political tensions inside BRICS.

Both banks give India money and a seat at the table where the rules of new finance are written.