India is unlikely to alter its engagement with the China-led Asian Infrastructure Investment Bank (AIIB) in which it is the second largest shareholder, despite a host of measures announced recently to reduce its trade and investment links with China.
“The World Bank is dominated by the US while Japan has more influence over Asian Development Bank (ADB). We are not taking money from China but from the multilateral development bank. I don’t see any structural change in our engagement with AIIB because of our tensions with China,” a senior government official said on condition of anonymity.
Speaking at the AIIB virtual annual meeting yesterday (Tuesday, 28th July 2020) finance minister Nirmala Sitharaman said she 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.
India was involved from the very beginning, to set up AIIB, to improve infrastructure connectivity in Asia and signed a memorandum of understanding to join negotiations for the proposed multilateral development bank in October 2014 along with 21 other nations.
In January 2016, it became a founding member of AIIB along with 57 countries. Since then, AIIB’s membership has grown to 102 countries. While India owns 83,673 shares with capital subscription of $8.4 billion in AIIB, China owns 297,804 shares with $29.8 billion capital subscription.
Harsh V. Pant, professor of international relations at King’s College London, said India should continue to engage with AIIB.
“It is a founding member and holds the second largest shares in it. So, it hardly makes any sense to completely disengage from it. What New Delhi should do is to ensure that its own interests are served by its membership very explicitly. And it should make sure that AIIB doesn’t end up becoming a tool of Chinese geopolitical agenda,” he said.
Replying to a question on AIIB in November 2014 in the Lok Sabha on expected benefits for India, then minister of state for finance Jayant Sinha said: “AIIB will be financing infrastructure projects in the Asian region. Therefore, if India joins the AIIB, we will be able to access resources for the financing of national and cross-border infrastructure projects from this Bank.”
So far, AIIB has approved up to $19.6 billion for 87 projects in 24 economies with India the largest beneficiary. AIIB has approved financing projects in India in a host of sectors like energy, transport and water including the Bangalore Metro Rail project ($335 million), Gujarat rural roads project ($329 million) and Phase 3 of the Mumbai urban transport project ($500 million).
Last month, it approved $500 million for covid-19 Emergency Response Fund and Health Systems Preparedness Project and another $750 million for covid-19 active response and expenditure support, in a co-financing arrangement with ADB.