AIIB and India

AIIB and India

• Jin Liqun has been re-elected as the President of the China-based Asian Infrastructure Investment Bank (AIIB) for a second five-year term.
• The President stated that the bank would remain an “apolitical institution” and continue to back projects in India.
• The management will look at the proposed projects from the economic and financial point of view and not with a political view.

Asian Infrastructure Investment Bank

• The AIIB is a multilateral development bank with a mission to improve social and economic outcomes in Asia.
• Headquartered in Beijing (China), it began operations in January 2016 and has now grown to 103 approved members worldwide.

India and AIIB:

• India was among the AIIB’s 57 founding members in 2016.
• It is also its second-largest shareholder (with 7.62% voting shares) after China (26.06%).
• It has received USD 4.35 billion from the Bank.
• This is the highest of any country, with the bank so far approving loans of USD 19.6 billion to support 87 projects in 24 countries.
• Turkey is second with USD 1.95 billion.
• AIIB has approved financing projects in India in a host of sectors like energy, transport, and water including the Bangalore metro rail project (USD 335 million), Gujarat rural roads project (USD 329 million), and Phase 3 of the Mumbai urban transport project (USD 500 million).
• In a recent virtual meeting, India said that it expects AIIB to introduce new financing instruments, provide financing for social infrastructure, and to integrate development of climate-resilient and sustainable energy access infrastructure into AIIB’s recovery response to the Covid-19 crisis.
• This implies that India is unlikely to alter its engagement with the China-led Asian Infrastructure Investment Bank (AIIB), despite a host of offensive measures announced recently to reduce its trade and investment links with China.

Chinese Angle:

• In June 2020, AIIB approved USD 500 million for Covid-19 Emergency Response Fund and Health Systems Preparedness Project and another USD 750 million for Covid-19 Active Response and Expenditure Support, in a co-financing arrangement with the Asian Development Bank (ADB).
• USD 750 million loans were approved two days after the clash in Galwan Valley in Ladakh along the India-China border.
• It has supported several projects under the Belt and Road Initiative (BRI) framework, but is not formally linked to the plan.
• India has concerns over the China-Pakistan Economic Corridor - a part of the BRI.

Way Forward

• India should continue to engage with AIIB as it will be able to access resources for the financing of national and cross-border infrastructure projects from the Bank.
• AIIB is also significant as the World Bank is continued to be dominated by the USA while Japan has more influence over the Asian Development Bank (ADB).
• Further, India needs to ensure that its own interests are served by its membership very explicitly. It should make sure that AIIB doesn’t end up becoming a tool of the Chinese geopolitical agenda.

Source: TH