Zee Media Bureau/Ajith Vijay Kumar
The formation of the BRICS bank is being hailed as a significant step in the developing world`s endeavour to have a more credible say in the global economy.
Five emerging economies – Brazil, Russia, India, China and South Africa – have proposed to form the $100 billion development bank with its headquarters in Shanghai and the first president being from India. The money would be invested in infrastructure projects within the BRICS countries, including the construction of roads and airports.
While the intent behind the move is to end the dominance of the West, especially USA, in the global financial order through the World Bank and the IMF (both headquartered in America), the BRICS grouping is also hoping that the bank would lead to the resetting of balance of power equations in the world at large.
With relatively strong economies - about one-fifth of the global economic output - the BRICS have taken a significant step with the formation of the New Development Bank (NDB). And the setting up of an African regional centre of the NDB in South Africa, has made it clear that the BRICS countries want the bank to develop into a BRICS + other developed countries entity.
While it is unlikely that the NDB would be able to seriously challenge the clout of the IMF and the World Bank, especially when Europe and the US appear closer to an economic recovery and trust growing again in the financial markets in the West.
The BRICS countries hope that their war chest, buoyed by the strong backing of China which holds the world`s largest foreign exchange reserves, will give them enough monetary power to take corrective actions in events like the exodus of capital from emerging markets last year after the US scaled back the monetary stimulus to its economy.
The new bank also reflects the growing impatience in the developing world for a sustained and balanced economic growth that would take the teeming millions out of poverty, towards prosperity.
India and China hope to be the biggest gainers from the formation of the NDB. The Asian giants have fast growing economies and both aspire to have a bigger say in the global order of the 21st century.
They would have found common cause in backing the NDB but the fact remains that the political equations between the two counties is far from being comfortable.
Also, China`s aim to emerge as a global superpower remains not aligned to India`s own push to be a powerful voice at the global stage.
While some see the formation of the NDB as a victory for India, especially after it managed to ensure that all the countries share the equity equally, fears remain that China, given its immense financial clout and the skewed trade balance ratio, especially with the US, may try to use the bank as a potent arm in the high-stake, high-risk game it is playing to beat the US at its own game.
All through the years when China slowly and then strongly emerged as the manufacturing capital of the world, the one impediment to its growth has been the lack of global financial muscle. NDB may be the option it has chosen to pursue to that end.
For India, the challenge to ensure that the new bank`s resources are used for its intended purpose would be daunting given the obvious keenness in New Delhi to not upset the good relationship India has forged with the West in the recent past.
India has still a long way to go before it enters, or before it should take sides, in the global financial power game being played between China and the West.
And, before PM Modi takes the formation of the BRICS bank as a success, it would be prudent for him to think whether the new bank would help him deliver on the `Acche Din` promise faster or whether the tax payers` money would have been spent better if used within the country rather than from a Shanghai based bank.