Cabinet to consider India’s membership of China-led multilateral lender AIIB

NEW DELHI: India is set to formally consider next week a proposal to join China-led Asia Infrastructure and Investment Bank. The finance ministry has moved the proposal ahead of June 29, when all member countries have to ink the articles of association for the multilateral lender. “The Cabinet is likely to take up the proposal,” a government official told ET. Chinese President Xi Jinping had last October floated the idea of setting up a multilateral infrastructure lender for the Asian region. The bank has received huge support from countries in Asia and Europe as also Australia.

With 57 countries joining the bank, all of the $100 billion authorised capital has been allocated. India’s share will work out to less than 10% while that of China, the largest shareholder, is 25%. India, which has a border dispute with China, can draw comfort from the bank’s decision to adopt the laid down lending practices followed by other global lenders such as the World Bank with regard to disputed territories.

Prime Minister Narendra Modi has given special thrust to India’s relationship in the region and is keen on expanding cooperation. The Chinese President’s visit to India and Modi’s recent visit to China are expected to energise relations between the two countries. Both India and China are looking to improve trade infrastructure and connectivity in the region and the bank is expected to support infrastructure initiatives.

Thus, active participation in the new bank is seen as an extension of this new relationship between the two countries for the development of the region. India and China have already signed a five-year trade and economic cooperation pact that lays down a medium-term roadmap for promoting economic and trade relations and are also in talks for Regional Comprehensive Economic Partnership or RCEP, a wider free trade pact in the Asian region.

The Modi government has identified infrastructure development as a key thrust area that includes building a new arterial road around the country, especially in the Northeast, building a chain of bridges, interlinking of rivers and development of ports.A new multilateral lender could help provide much-needed funding resource for building this infrastructure. Separately, Brazil, Russia, India, China and South Africa have joined hands to float the Brics Bank. India will have the presidency of the Shanghai-headquartered bank for five years and has chosen leading private banker KV Kamath for the post.