India can largely benefit from AIIB

The launch of the Asian Infrastructure Investment Bank (AIIB) last week, seen as a multilateral rival to the World Bank-Asian Development Bank paradigm and symbol of China’s growing clout on the global economy, should only be supported by India which requires massive investment to fund its large infrastructure needs, especially when money is hard to come from the private sector in the face of fragile state of the world financial markets.

The $100 billion bank with India being the second largest contributor to its seed capital will start funding projects from the second quarter of 2016. Though the AIIB would be lending $10-15 billion a year for the first five-six years, India should aggressively pitch for the new source of multilateral funding for revival of its economy through a higher spend on key infrastructure like roads, railways, ports and airports. Between the time the AIIB was conceived and launched, the state of global economy has only worsened, ironically owing largely to China losing a grip on its own markets. Whether China’s clout on the economic landscape has increased is anyway evident by the kind of tremors sent by the slowdown in demand for commodities like metals and oil by Chinese manufacturers who have been dominating the global supply chain for decades.

So, it was no surprise that some of the key US allies including Germany, Britain and Australia defied signals from Washington and agreed to join the new institution for raising and lending money for developmental needs. With 26 per cent stake, China would surely dominate the AIIB and control its leadership, but others like India should wait and see how the new kid on the block runs its operations before being influenced by political considerations. The fact that India’s bid for Vice-Presidentship has been defeated should not be taken as a setback since the principle of merit- based appointments has been upheld, for starters.

In fact, the main criticism on the World Bank-ADB governance model is directed against the hegemony of the US and its allies to run the Bretton Woods institutions based on a flawed governance structure which emerging countries like India and China have been seeking to change, unsuccessfully. As for the apprehension that what the US has done with the World Bank, China can do with the AIIB need not be taken too far, at least at this stage, since the Chinese leadership appears to be conscious of the fact that the new institution would remain under constant scrutiny whether it is following the gover-nance rules different from the US-led lenders. India, for now, should focus on meeting its financing needs.