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3 April 2015

Geo-economic Significance of the Asian Infrastructure Investment Bank

March 30, 2015

Since the dawn of civilization, except for the last 250 years, Asia had half the world’s wealth and two centres of gravity – China and India. With Asia estimated to possess two-thirds of global GPD in 2050, because of favourable demographics India has the potential to overtake the United States and once again become the world’s second largest economy. As in the past the Asian giants will share this space, now requiring even closer economic integration of Asia enabled by the Asian Infrastructure Investment Bank.
The new bank

On October 24, 2014, 20 countries, including India, signed an MoU in Beijing to establish the Asian Infrastructure Investment Bank, which will have a paid up capital of $100 billion. Unlike the IMF and World Bank, no country will have a veto in this new bank. Voting rights are expected to be based on a combination of GDP and PPP, and India is expected to be the second largest shareholder. There are only three seats for non-regional countries in the Board; a sharp reversal from the current situation in multilateral financial institutions. After some initial hesitation over fears of China using the new bank to project its power in Asia, India, along with other countries in Europe and East Asia, is seeing the institution in terms of providing new economic opportunities.

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