Brics bank and what does india get out of it
On 15th July,2014,even as 5 BRICS Leaders smiled and held hands in Brazil and announced the New Development Bank,a new IMF like body,concerns remain about its future as well as hopes of how it could forever change our world.
The need for this bank was first pointed out by a Delhi based think tank,n soon took concrete shape in 4th BRICS summit,New Delhi.
Prior to that,countries in the BRICS,especially PRC and Brazil,were crying for more reforms in the IMF and World Bank itself,two existing monetary fora,with full control of the Western world,born out of Woods conference in post world war scenario....These two institutions headquartered in USA,gives disproportionate control to Western countries in determining not only these institutions' functioning,but also wide control over world financial affairs.
The new BRICS bank,is the first step to redress that situation of unbalanced western hegemony.
BENEFITS FOR INDIA.....
1.A new bank to lend us loans at cheaper rates and easier clauses than WB,IMF...as it our bank...
2.Inaugural presidency of the bank has been wrested by us,(thanks to our gutsy NAMO),And if the president is given powers akin to World Bank president or IMF MD,then this is a game changer for India.Usually as head of executive body of the bank,president is the one who decides who gets the loan and under which conditions,he is the CEO of the bank.India as 5yr inaugural president means we get to decide whom to give loans n whom not,thus effectively halting chinese dreams of world domination.As president of the Bank,India gets to set the broad policy and direction of the bank in its formative years,which once set will be difficult to change in future....thus despite misplaced fears,for now BRICS BANK,will be a multilateral bank,without bending to nefarious Chinese or Russian interests,and only a strong indian presidency in the foundational decade can prevent it.
3.This new bank will also help us in selling our soft power,since India as president will control and co ordinate,albeit with other nations the policy of the bank,expect more leverage for Indian brand worldwide,for the first time a big international monetary body would have anI ndian president,presiding over its birth,nurturing and creating a truly multi.lateral fora unlike World Bank or IMF.
4.Again as a result of serious fightback negotiations by the PM,what we get is equal voting rights for all BRICS nations...which means while India wont single handedly control the bank,it wouldnt allow China or Russia to do so..As seen in the negotiation tables,India ,SA,Brazil all three were cooperating very closely,augurs well for us,if IBSA,stand strong together,we can easily stop Chinese designs,if and when they want on this bank.
4.The reserve corpus of 100$ billion,is perhaps the most vital and most understated achievement of this summit.It will ensure that our currencies,all of which suffer severe fluctuations,because of usa monetary policy changes,and FED RESERVE actions,now remain well protected against these deliberately induced external shocks...this in turn would boost investor and banking climate in all our nations.More over,this huge fund corpus can be extended to other developing countries currently outside the BRICS in the near future..Here too the role of the new Indian President will be closely watched.
POTENTIAL RISKS
1.Chinese hegemony:China has successfully wrested the headquarters of the bank to be based in Sanghai.This was however almost pre decided cause president Putin and PM Singh had already acceded to the Chinese request in Durban 2013.Indian officials say.Although the new Modi led regime,wanted New Delhi as head office,negotiations couldnt be taken beyond a point,because frankly India had already commited to Shanghai,an year back.
Ok,now the question in our mind is, if Shanghai was almost decided,why did the negotiations drag on so long,and according to one Brazilian diplomat ,came close to breakdown,until about 10 minutes prior to deadline,when issues were finally settled.
The answer lies in the fact that PRC,after knowing that it has already bagged the head office,wanted few more things in its pockets,and with russia willing to accomply,it dreamt of a bigger share in both the bank and the reserve corpus as well as presidency.
Not only are the Chinese tough negotiators,they want everything,probably fairly so,as they are more economically powerful than all of us combined.
. The Chinese know an equal power sharing formula,effectively,can isolate it in its own bank(as they feel about it).And this is likely to happen in near future,because Brazil,India,SA..coordinate closely with the US and have no morbid hatred for it unlike China...politically and economically,our world view(IBSA) and Chinese view are poles apart.
While we formed the bank because we want to rid ourselves of US power,n not simply give in to an even lesser power,the Chinese wanted the bank to be a symbol of their arrival on world stage...an international court like bank sucking upto its interests and allowing China to behave like USA in the the"new world bank"...the logic..i invest more,i control more,i decide more...and u support me,as i am main challenger to USA.
But due to tactical games played by India,which would do anything from Chinese dream to stop being fulfilled,especially knowing the fact that,while head office is a stone house,the real life of the bank is the CEO and the voting shares,scuttled Chinese moves at both the levels,and wrested the presidential post for itself,albeit with full brazilian and south african support,so as to forever set impartial policy steps,to protect the bank from even future Chinese monopoly....to those not understanding the significance of inaugural presidency...it is as important as being chairman of the constituent assembly and premier of a new born country....u basically will determine what the institution becomes...just like even today India is steeped in Nehruvian and Ahmedkar system of governance and law making...I can only shudder to think,what would happen if we got the head office and chinese got the presidentship...we would like have another JNU right in the heart of Delhi,now controlling monetary policy..instead what we have now is an oppurtunity to teach the Chinese some democratic etiquette on their soil...SOUTH AFRICA OR BRAZIL..wouldnt have managed this better as we would,because we know and are most concerned by hideous designs of the Chinese.
2.Internal rivalry and Chinese feeling of not getting enough...........
A sneek peak of the negotiations and the thought behind each negotiation shows how poorly united BRICS is..even while negotiating bank basics,we are trying to fight out each other...how will we unite and function??
If i were a Chinese,i wud feel tremendously dissapointed by what my country got out of this...
I contribute to over 50%of the group gdp,exports,reserves and even the corpus fund and in return i get only a stone house in my city,with countries like south africa 20th times smaller in gdp having equal share as me,and my next door bitch ,dictating bank norms and structure to me!!! what the chinese wanted was a body like IMF OR WB,what they get is bullshit of equal vote sharing with far junior countries..how is it better?..it might not have USA but pricks like INDIA ..or even brazil,both of whom will side with US led world order anyday.
With these less of its wishes fulfilled,will China seek a newer forum sooner than later,thus loosing interest here,and leading to slow demise of the body,even before it attains maturity...because China is the largest cog in this wheel..and is being denied its true space...so will it even stsy on here for long??or will its own proposed Asian Investment Bank..be its new focus ..its true World Bank...
..HOWEVER AS WE MAY DENY...none of other BRICS powers can face upto usa led lobby without chinese backing!!!
WHAT PROMPTS CHINA TO STAY ON IS OUR 3RD FLASH POINT...
3.Unified currency...the corpus aims to stabilise economies against dollar shocks and lower american influence...so are we planning to lower american influence by making a dollar based corpus..??americans will die laughing at this group..so in the longer term,a new currency will take over...here lies the great game!!!Chinese are known to be long term planners,seemingly we have contained them now,but say a decade down the line.. who will replace dollar..??
while right now rouble is the only freely convertible currency amongst BRICS states,rouble is a currency of a weaker country and has less acceptance,rupee is no where even in the picture...meanwhile yuan is the currency on the rise..already many countries r swapping yuan with china...one being its primordial enemy and second largest trade partner JAPAN...NOW THE Q IS WHETHER INDIA WOULD ALLOW FALLINF FROM THE LAP OF THE DOLLAR TO THE YUAN...say..15 years down the line...the answer is no...for now,we can work with rouble or dollar,but this currency issue,will return to bite us all,including china sooner than later...
So after weighing everything,including our diplomatic coups and relative misses,we get to the point,whether BRICS BANK would survive to lead the world??none of us can say now,but only hope..that we do like..germany and france have both taken leadership to make EU survive for this long!!!and it is where India and China hav to take lead,because it is our differences which can tear this group apart,and our resolving some of those differences,which can make it a third or rather the best counter to WB,IMF.