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BRICS Bank
BRICS New Development Bank
Context: Indonesia, Southeast Asia’s largest economy and a recent member of the BRICS bloc, has announced a $1 billion contribution to the BRICS-led New Development Bank (NDB).
What is the New Development Bank (NDB)?
- The NDB, formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS nations (Brazil, Russia, India, China, and South Africa).
- Headquartered in Shanghai, China, it was created to mobilise resources for infrastructure and sustainable development projects in BRICS member countries, other emerging economies, and developing nations.
- Unlike Western-dominated institutions like the World Bank and IMF, the NDB is governed by its member countries on an equal basis, with no single country holding veto power.
- Its membership has expanded beyond the founding five to include countries like Bangladesh, Egypt, the UAE, and now Indonesia.
Why was it constituted?
- Need for Alternative Financing: To reduce the dependency of emerging economies on Western-led financial institutions (World Bank, IMF) for development finance, which often came with conditionalities and was perceived as insufficient to meet massive infrastructure needs.
- Reforming Global Governance: To reflect the growing economic weight and demand for a greater voice of major developing countries in international financial governance, which remained skewed in favor of established Western powers.
- BRICS Solidarity: To institutionalise financial cooperation among the BRICS nations, translating their political and economic dialogue into tangible, project-based collaboration.
What are the objectives of NDB?
- Infrastructure and Sustainable Development Financing: To support public or private projects through loans, guarantees, equity participation, and other financial instruments in sectors like clean energy, transport, irrigation, urban development, and social infrastructure.
- Promoting Regional Integration: To foster greater regional connectivity and cooperation through cross-border infrastructure projects.
- Complementing Existing Institutions: To supplement the efforts of existing multilateral and national development banks.
- Adherence to Best Practices: To operate with principles of transparency, efficiency, and sustainability, adhering to high environmental and social standards in its projects.
- Mobilising Capital: To tap into global capital markets and use member contributions to leverage additional resources for development.
How is it in India’s interests?
- Access to Long-Term Finance: It provides an additional, substantial source of long-term, low-cost foreign currency financing for India’s massive infrastructure needs, complementing domestic resources and loans from other MDBs.
- Strategic Autonomy: It enhances India’s strategic autonomy by diversifying its sources of development finance, reducing over-reliance on any single bloc or institution.
- Global Leadership Role: As a founding member and major shareholder, India gets a prominent platform to shape the agenda of a major global institution, boosting its profile as a responsible stakeholder in global development.
- Project Implementation: The NDB has funded key projects in India, including in renewable energy (solar parks), irrigation, and urban development, directly contributing to national priorities.
- Institutional Influence: India’s equal say in governance ensures that the bank’s operations align with development philosophies that suit the needs of countries like India.
Diplomatic Leverage: The NDB serves as a tool of South-South cooperation, allowing India to strengthen ties with other developing nations through collaborative projects, enhancing its diplomatic outreach.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
