India’s Asian Infrastructure Investment Bank Ties Post-COVID
India continued to remain the biggest borrower and second-largest shareholder of the Asian Infrastructure Investment Bank (AIIIB) in 2019; the relationship has now progressed to the health sector. India’s support for the Beijing based bank has been consistent and proactive, as opposed to its anti-Belt and Road Initiative (BRI) rhetoric to China’s ambitious global infrastructure project. Will AIIB stand the pressure of strained ties between India and China and emerge as an extensive cooperative venture for both nations in lieu of India’s shift away from Beijing?
Prime Minister Narendra Modi greets Asian Infrastructure Investment Bank chief Jin Liqun at the third annual meeting of AIIB Forum in Mumbai in 2019. (File Photo | PTI)
The world entered into an ‘Asian Century’ – result of impressive growth of Asian nations like China, India, Japan - that put renewed focus on trade with and via Asian nations as well as the geo-strategic importance of the Indo-Pacific. The coronavirus pandemic, however, has shaken the world to its core; governments, international organizations and established structures are all struggling to find their footing in the midst of the unprecedented chaos that has been unleashed. In such a scenario, the realization of the true potential of the ‘Asian Century’ is threatened, with the International monetary Fund (IMF) predicting that Asian economies for the first time in almost six decades will see “zero growth” in 2020.
The importance of infrastructural development has hence increased even more in a post-COVID order from its already high pre-COVID demands; Japan’s Asian Development Bank (ADB) in 2018 estimated Asian infrastructural deficit to be resting at US$459 billion. Further, according to Moody’s, funding diversity especially in the Asia Pacific infrastructural sector will be “increasingly diversified” in the post-COVID order. With health infrastructure taking the lead in the world post-COVID-19, the AIIB released in March 2020 an official background document that highlighted its predicted key priorities for the world post-pandemic. These include an increase in investments by developing economic in the public health infrastructure sector with a special focus on Asia’s demographic trends. Since COVID-19 has targeted the elderly more and as the number of senior citizens – ages 65 up – in Asia is projected to double to 802 million in 20 years compared to 402 million in 2020, this health sector investment will supersede others. The document also predicts that public health infrastructure will have to be supported by robust technology and that supply chains will have to become diversified, resilient and sustainable.
India’s China conundrum and AIIB
Asia is geographically split in two with India as the middle link. Towards the East, with countries like Japan in the picture, India’s dominant outlook is focused on economic upliftment, stability and peace. Towards the West, there is a larger scope of conflict with terrorism and religious tumult. India is at the center of economic peace and prosperity as well as areas where third-party political dominance is yet to be established due to years of war. This gives India the power to choose and create its own connectivity narrative and makes it a crucial and pivotal power, with the Indo-Pacific Ocean surrounding its Southern borders. For India, connectivity is diverse and holistic in nature and serves as both a means and an end. Sharing the vision of its international counterparts, India believes that better connectivity in the fields of infrastructure, economics, technology and people-to-people contacts among others will bring about prosperity in a balanced manner for all.
Concurrently, India also believes that connectivity must be based on “universally recognized international norms, good governance, rule of law, openness, transparency and equality”. These initiatives “must be pursued in a manner that respects sovereignty and territorial integrity” and not result in financial debt-trap situations or cause damage to the environment.
It is because of these very reasons that India stands opposed to China’s Belt and Road Initiative (BRI) which is a unilateral, state-run and highly ambitious project by the Xi Jingping government. At the 2017 Raisina Dialogue, PM Modi clarified that “Only by respecting the sovereignty of countries involved, can regional connectivity corridors fulfill their promise and avoid differences and discord”; in the official Indian opinion, China’s BRI does not fit this criteria. India and China are engaged in a power-partner parity relationship; without signing on to being a part of BRI, India has engaged in Chinese projects like the Asian Infrastructure Investment Bank (AIIB), maintaining that it wants inclusivity in the Asian geopolitical landscape. AIIB is a universalist and multi-stakeholder project that promotes India’s developmental and national security interests rather than challenge them, as is the case with BRI. India is a founding member of AIIB and is also its second-largest stakeholder.
AIIB and India post-COVID
Multilateral Development Banks (MDB) like AIIB take on an added role in mitigating economic impacts of disasters on their borrowers; in this regard, AIIB’s funding has also increased with a focus on broader issues of infrastructure. The bank created a Crisis Recovery Facility (CRF) in order to provide support for its members in alleviating the financial pressure arising from COVID-19. With the objective of providing funding worth USD 5 to 10 billion over a period of 18 months from April 2020 until October 2021, AIIB’s CRF will lend financing to both public and private sector outlooks of its members. It is under CRF that AIIB approved a USD 500 million loan in May followed by a USD 750 million additional loan in June to India in order to strengthen the nations COVID-19 response. Total approved sovereign loans by AIIB to India, including the recent ones under CRF, are over USD 3.6 billion, which goes to show that its association with New Delhi is only deepening.
It is also important to note that both these loans were sanctioned amidst worsening border tensions between India and China, highlighting yet again how India views AIIB as if not separate, then independent, of its China policies. The COVID-19 Active Response and Expenditure Support (CARES) program under AIIB, created for its engagements with India under its CRF, has seen largescale acceptance by India. CARES is co-financed with the Asian Development Bank (ADB) and is on its way to being a major backbone for India’s COVID-19 economic recovery programs. Hence, while the Indian government can be expected to take a stronger stand against China post-Galwan by keeping its national security interests in mind, the thrust on economic nationalism will only deepen the India-AIIB connect. While India will actively try moving away from China dependant supply chains and possibly also move towards an alliance framework with the US and other Quadrilateral partners, AIIB is essential to its infrastructural growth aims.
Mapping the future
The post-COVID trajectory for India-AIIB, with the establishment of CRF and CARES, had the potential to only upgrade and blossom further; then, along came Galwan. The post-Galwan trajectory of India-China ties promises to be anything but stable. A deeper scrutiny of participation by China in India’s infrastructure projects can be expected, with Indian Prime Minister Narendra Modi’s ‘Make in India’ and ‘self-reliant India’ calls taking on a nationalistic tenor. In this regard, the AIIB approved projects for India and proposed loans can be expected to be re-designed. For instance, a proposed project of USD 800 million for phase 2 of the Chennai Metro Rail is under consideration with AIIB and is highly likely to get through; including ‘Make in India’ as a clause in the official deal can go long way in strengthening AIIB-India ties. Being a MDB, the clause will benefit Indian industries, create jobs and also encourage investments from Indian partners. A similar arrangement for India in its engagement with all MDBs and international investors, especially Chinese companies like Shanghai Tunnel Engineering Company Limited in its newly bagged tender for New-Delhi Meerut RRTS Corridor, can be encouraged.
AIIB can very well constitute itself as an exhaustive cooperative venture with China for India and serve as a key channel of communication amidst worsening ties between the two Asian giants. AIIB spent the past five years laying its foundations; the coming five years are sure to define its seriousness in the global financial arena. With anti-China rhetoric increasing all around the world, it is time for AIIB to prove its multilateral, universalist and inclusive rhetoric beyond the shadow of a doubt. By rapidly responding to the COVID-19 pandemic, distancing itself from the Chinese Communist Party’s aggressive posturing, investing heavily in its member-states and building the future of public health infrastructure around the world, the AIIB can cement its stature now for years to come.
(Eerishika Pankaj is an Editorial Assistant to the Series Editor for the Routledge Series on Think Asia and has previously been employed as a Research Associate in a Bengaluru based think-tank. Ms. Pankaj has also worked as a Research Intern with the Delhi Policy Group (DPG). Her research interests lie in Chinese foreign and domestic policies, Asian security studies, pathologies of international organizations and human security studies in conflict zones).