The BRICS bank is seen as a mixed blessing for India. Touted as the first step towards an alternative financial order, the concern is India is only replacing a West-centric system with a Chinese-controlled one.
One school says China’s economic clout — the Middle Kingdom represents over half of the BRICS’s GDP — means all BRICS institutions will be puppets of Beijing.
This school believes the fact that the bank will be based in Shanghai rather than Johannesburg, as originally planned, will only increase China’s hold. “Staffing will now largely be Chinese,” says Rajiv Kumar, economist at the Centre for Policy Research and an ex-Asian Development Bank staffer. “Beijing will ultimately determine lending policies for all.”
Granting the first presidency to an Indian, says Sanjaya Baru, geoeconomics professor for the International Institute for Strategic Studies, “was a lollipop from China designed to win over the bureaucrats of our finance ministry — they will now vie to get the post”.
BR Deepak, a Brics specialist at Jawaharlal Nehru University, is more sanguine. The decision to split the vote share equally among the five members will contain Beijing’s influence, he feels, but adds that “China would like to change this.”
Deepak believes the bank is financially beneficial to India: “It will help fund Indian infrastructure without IMF-style conditionalities.”
Kumar, though, sees this differently. “Getting finance for infrastructure has never been an issue. The problem in India has been of execution, not of funds,” he says.
The New Development Bank’s capital base of $50 billion, he says, is too small: India’s needs an estimated $1 trillion (Rs. 60 lakh crore) over the next five years to restore its crumbling infrastructure.
The other concern is over the Brics contingency reserve fund which is already in Beijing’s grip: China is providing over 40% of the fund’s initial $100 billion corpus.
Baru sees the bank’s creation as an implicit acceptance by New Delhi that “for the foreseeable future, we won’t get in the way of China and we are only buying time”.
Indian officials have argued that the bank can be a positive so long as New Delhi keeps a close watch on how its rules develop, while forming the right bonds with Brazil and Russia.
But that will be tall order for Indian diplomacy. Kumar concludes the BRICS bank “does not contribute in any way to India’s national interest”.