At BRICS, India must bank on the NDB, Pg8

Key Highlights:

• BRICS leaders convened in New Delhi, with India holding the chair, to discuss the grouping's future and global financial order.
• The expanded BRICS now accounts for nearly 40% of global GDP and 55% of the world’s population, but its voting share at the International Monetary Fund (IMF) remains stagnant.
• The article emphasizes leveraging the New Development Bank (NDB) to enhance BRICS's influence without directly challenging American financial dominance.
• The NDB, established in 2015, has approved 139 projects worth about $43 billion, significantly less than the Asian Infrastructure Investment Bank (AIIB).
• India has secured nearly $10 billion across 32 projects from the NDB, including metro rail systems and the Delhi-Ghaziabad-Meerut RRTS corridor.
• The NDB aims for 30% of its lending and borrowing to be in member countries’ local currencies by 2026, with a focus on Renminbi bonds.
• India is actively pushing for the launch of a rupee bond through the NDB to mobilize around ₹25,000 crore over five years.

Detailed Insights:

• BRICS, initially formed in 2011, faces internal geopolitical divergences, with some members advocating an anti-West stance and others a non-West approach.
• India's strategy within BRICS aims to maximize the grouping's potential without inadvertently strengthening China's strategic position.
• The NDB was established by BRICS countries to mobilize resources for infrastructure and sustainable development projects in emerging markets.
• Compared to the AIIB, the NDB has a slower disbursement rate, with only about $20 billion of approved loans disbursed.
• Challenges for the NDB include an asset bottleneck, partly due to sanctions on Russia, which impact its credit standing and dollar funding costs.
• The NDB has not extended new credit to Russia since March 2022 to protect its credit rating, despite Russia's push for de-dollarisation.
• The bank's rules mandate equal voting shares among founders, making capital expansion difficult if financially weaker members cannot contribute.
• The NDB's preference for local-currency lending offers an alternative to reduce reliance on the dollar, especially amidst global economic volatility.
• The NDB recently priced a ¥7 billion (~$1.04 billion) Panda bond in the China Interbank bond market, highlighting the dominance of Renminbi in its local currency efforts.
• India's proposed rupee bond through the NDB was first discussed in 2016 and is now in its final stages, aiming to diversify local currency options.
• BRICS, with its tangible economic tools and expanding membership, offers a distinct model of multilateralism compared to other global arrangements.

Key Concepts Involved:

• BRICS: An acronym for a group of major emerging economies: Brazil, Russia, India, China, and South Africa.
• New Development Bank (NDB): A multilateral development bank established by the BRICS states to mobilize resources for infrastructure and sustainable development projects.
• International Monetary Fund (IMF): An international organization working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
• Asian Infrastructure Investment Bank (AIIB): A multilateral development bank that aims to support the building of infrastructure projects in the Asia-Pacific region.
• De-dollarisation: The process of reducing the global reliance on the United States dollar as a reserve currency and for international trade.
• Panda Bond: A Renminbi-denominated bond issued by a non-Chinese issuer in the People's Republic of China's mainland bond market.