Some commentators have seen the NDB as an attempt to shift the balance of power away from the World Bank, seen to be dominated by the US and other Western powers. This well may be a goal that is inextricably tied to the goal of smoothing the path for large-scale investments in development infrastructure. However, the World Bank has welcomed the new entrant, and clearly the global demand for developmental investment is many times the new addition to lending capacity. One commentator, pushing the anti-Western line to a rather incredible extreme, hoped that the NDB will be more sensitive to environmental concerns and human rights than its older cousins. Given the nature and track record of the NDBs member governments, this seems less than unlikely.
It is clear that the 800-pound-gorilla of the NDB will be China (just as Japan has been for the ADB). Indeed, India reportedly had to insist that all members put in equal capital, which made South Africas ability to contribute a binding constraint. India got the consolation prize of the first presidency, but China got the permanent location, which matters most. The other big two, Brazil and Russia, also received governing clout, with South Africa, the S add-on to the original BRIC, being left with a regional centre for Africa. Clearly, China will use this as part of its long-term Africa strategy.
Since the BRIC creation by a Goldman Sachs employee had little logic beyond size and the growth potential that comes from not being rich, perhaps pooling capital is the best the BRICS group can do in terms of common cause. Otherwise, it is a strange quasi-political animal, especially since the behaviour of Russias leader has become increasingly aggressive and confrontational. Given the BRICS grouping, however, India has had little choice but to go along with the new venture, and there is little harm in it beyond seeming to give a positive gloss to an unsavoury regime or two. And if the NDB can perform some efficient financial intermediation for infrastructure development, there will be a benefit.
But turning to Indias strategic goals, which might be stated simply as economic development and geopolitical security, the BRICS grouping is a sideshow, in my opinion. I think the G20 is a much more important grouping for Indias needs. The G20 membership is less dominated by China or tarred by Russias actions. And the G20 membership, in terms of countries like Japan, South Korea, Germany and Australia, in addition toobviouslythe US, is a much better source of the combination of private financial capital and expertise that India needs. In brief, India is stuck with the BRICS, and has to play along, but its long-term interest lies in building ties within the rest of the G20. I note this holds true despite the obstruction of the US Congress to rebalancing power within institutions such as the International Monetary Fund (IMF) and the World Bank, which partly prompted the NDB and its companion BRICS Contingency Reserves Arrangement (an IMF counterpart)this is a reflection of the USs broken politics, and not part of an evil strategy of hegemony. Indias needs and interests are not identical to those of its BRICS partners. This applies to geopolitical security as well as to economic development.
Indeed, Indias Southeast Asian neighbours, including Singapore, Malaysia, Thailand, Indonesia and Vietnam (and extending to Australia), are much more important for both its strategic goals. In particular, India should be focusing on attracting capital and expertise from some of these countries, learning from others how to integrate Indian firms into regional and global production networks, and building trust for deeper ties in international trade and investment, both inward and outward. This approach requires much more ground-level engagement by a range of Indian government agencies and functionaries, from diplomats to technocrats, and coordination across ministries that normally operate in relative isolation. But while the costs of this approach are somewhat higher, its benefits will be many times greater, and more sustained as well.
The author is professor of Economics, University of California, Santa Cruz