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18 February 2016, Lowy Interpreter

India: shaping economic multilateralism

In recent years, India has elevated its commitments to multilateral economic institutions - demonstrating the determination to shaping economic multilateralism. The result of this has been uneven, but it has yielded important questions

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In the last few years, India has made rapid strides in deepening its commitment to the multilateral community: it has co-created new multilateral banks such as the BRICS NDB and AIIB;[1] elevated its involvement in geoeconomic forums, including the G20 and FSB;[2] and reconfigured its engagement with the three Bretton Woods institutions, namely the World Bank, the IMF and WTO.[3] By doing all this, India has demonstrated a determined approach to shaping economic multilateralism

But how fruitful has this energised relationship been for India? Has the country managed to negotiate a more powerful role for itself in these multilateral networks? Has it contributed to shaping the new economic multilateralism?

An examination of these questions shows that the results for India have, so far, been uneven.


The BRICS NDB was an idea conceived by India. The bank’s shareholding is equally divided among the five founding members; this, technically, makes it the multilateral bank in which India has the greatest influence.

But support for the NDB within India has been mixed. While the government and the strategic community recognise the bank’s potential as an instrument of economic statecraft, the Indian business sector has been sceptical. In its view, the BRICS forum itself is an economic mismatch, vulnerable to Chinese domination and a Goldman Sachs marketing gimmick taken too far.

If the bank had been headquartered in Mumbai, its visible presence in the city would have quelled sceptics and spurred interest in India’s foreign economic policy among the business community. Losing the location to Shanghai was therefore more than a functional setback for India.

Although the media claimed that the opportunity for an Indian to head the bank as President was a fitting concession, this was a misperception. The President’s office is rotational, and every other founder gets a Vice President. A board of directors and governors, chaired by Brazil and Russia, respectively, oversees the executive management. India’s turn as President, thus, has mistakenly been celebrated as a chance to influence the institution asymmetrically and permanently.

As a founder, India will benefit only when the bank becomes an institution of global value, one that truly represents new economic perspectives in emerging markets and developing countries. For example, digital infrastructure, online education, efficient delivery of public services, social enterprises, and sustainable infrastructure are all growing areas that the bank could champion.

Following the NDB closely, but with more speed and scale, is the AIIB. When China first pitched the idea in 2013, the bank’s focus on infrastructure financing, and the prospect of India holding the second largest share in the bank, was too compelling to even hesitate. India was one of the first public supporters of the initiative.

But by the time the AIIB was established in June 2015, there were 57 “prospective founding members,” including developed countries such as Germany, Britain, and Australia. This watered India’s hopes of having the same, exclusive, coveted status of a founder as it has with the NDB. The excitement was further moderated by the disparity in the voting share between China (26.06%) and India (7.5%),[4] the largest and the second largest shareholders. This is only slightly more than India’s share in the ADB[5] (6.4%)[6]  and the World Bank (3.02%).[7]

Still, China’s disproportionate control of the bank can be justified by its majority contribution to the AIIB’s funding, and AIIB remains a chance for both China and India to redefine development finance for the masses. No other country has the challenge of addressing the infrastructure needs of a billion-plus population, which has to be created without disrupting livelihoods and the environment.

G20, FSB, and B20

India has elevated its involvement with the G20 since the group was reconstituted as a heads-of-government forum in 2008. It is now recognised as the premier forum for developed and developing countries to collaboratively govern the global economy.

But India’s ability to negotiate long-term cross-border and cross-disciplinary issues remains weak. The Indian government lacks the intellectual capacity, think tanks lack funding, and businesses lack patience. As a result, India’s concerns are not articulated, reflected, or incorporated at the G20.

In part, India’s lack of full commitment emanates from a misconception that the G20’s decisions are not binding and are therefore inconsequential. But this is inaccurate—the regulations on banking and finance set by G20-supported international standard-setting bodies such as the Financial Stability Board and the Basel Committee on Banking Supervision, are in fact binding. And these may even require legislative changes within India.

Even informal G20 sub-forums such as the business-focussed B20 are becoming powerful lobbying groups and will substantially influence global policies in the coming years. This is why the weak presence of Indian business leaders and chambers in the B20 process is a matter of concern.

Clearly, India has to do more to effectively engage with the global economic process. For that, giving priority to the process of global policy-making and allocating resources for preparation and negotiations is a necessary first step by all stakeholders.

World Bank, IMF, and WTO

Meanwhile, India’s bittersweet relationship with the existing multilateral institutions continues. Its engagement with these bodies goes back to the 1944 Bretton Woods conference where Chintaman Deshmukh, the first Indian governor of the Reserve Bank of India, was on the committee that designed the World Bank.

In subsequent years, India became a proponent of the multilateral negotiating system. We supported the rise of the WTO and developed internal processes to contribute to its functioning. India acknowledges the IMF’s bail-out during the 1990 balance-of-payment crisis, World Bank loans for infrastructure development, the International Finance Corporation’s equity investments in India’s corporate sector, and the WTO’s dispute resolution mechanisms.

Now, as its economic heft grows, India is incrementally reconfiguring its involvement. We gave $10 billion in 2012 to the IMF’s New Arrangements to Borrow programme to address the Eurozone financial crisis, but are displeased with the institution’s focus on western geopolitical priorities such as Ukraine.

At the WTO, India’s stance has become less submissive. We regret the concessions we made on Mode 3 (free movement of capital) for developed economies without commensurate promises for Mode 4 (free movement of natural persons) that would have benefited India. There is a similar regret about the methodology to compute food subsidies. And India is uncertain about how significant the WTO will remain in the wake of mega-trade agreements such as TPP and RCEP,[8] which India wants to join. On the World Bank front, Indian interest in aid and concessional loans from the Bank is waning because large Indian companies are able to raise foreign institutional funding.

Given this mixed bag, the future of these relationships will depend on how the three Bretton Woods institutions can reform to accommodate India’s concerns. But the five-year delay by the United States in ratifying the 2010 IMF reforms does not invoke hope for speedy reconfigurations.

Still, India has a decades-long familiarity with these institutions and retains trust in their downstream implementation processes. This cannot be easily discounted.

What now?

India is a late-bloomer, rather than a latecomer, in global economic leadership. It remained inward-looking while it tried to build its internal economic engine, but now the picture is changing. Given our energised foreign policy and global ambitions, India must deepen its global economic participation and play a leadership role, especially in other under-developed multilateral forums of strategic economic potential such as SAARC.

Although India’s relationship with multilaterals has brought uneven results so far, it has yielded necessary learning experiences. These can help India refine its approach towards the institutions, consonant with how economic multilateralism itself is evolving.

Akshay Mathur is the Director of Research and Fellow, Geoeconomics Studies at Gateway House: Indian Council on Global Relations.

This feature was originally written for The Lowy Interpreter and published on 18 February, 2016. It has been republished with their permission.

For interview requests with the author, or for permission to republish, please contact Ashna Contractor at or 022 22023371.

© Copyright 2016 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorized copying or reproduction is strictly prohibited.


[1] Brazil, Russia, India, China and South Africa (BRICS) New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB)

[2] Group of 20 (G20) Financial Stability Board (FSB)

[3] International Monetary Fund (IMF) and World Trade Organisation (WTO)

[4] Huang Cary, ‘Voting rights reflect Beijing’s leading role in AIIB’, South China Morning Post, 30 June 2015, <

[5] Asian Development Bank (ADB)

[6] Asian Development Bank, ‘Shareholders’, <>

[7]  World Bank, ‘IBRD Country Voting Table’, <>

[8] Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP)