India can finance infrastructure projects through the AIIB and remain critical of China’s Belt and Road Initiative

by Ankit Panda

If India isn’t down with China’s Belt and Road Initiative, then why is it happily accepting funding from the China-led Asian Infrastructure Investment Bank (AIIB)? A headline in the Financial Times on Sunday gets at this implicitly, with the headline “India benefits from AIIB loans despite China tensions.”

But this frames what is a nuanced Indian position on Asian connectivity initiatives in far too rigid a mold. India, having signed up to participate in the China-led multilateral development bank in October 2014, is a founding member of the AIIB.

It also has the second-largest voting share in the bank after China. New Delhi was approached as early as June 2014 about participating in the bank, which was clearly marketed by China as a rival to U.S.- and Japan-led institutions like the World Bank and the Asian Development Bank.

This was months after Chinese President Xi Jinping announced the “belt” and “road” that would become the centerpieces of his Belt and Road Initiative (BRI) in late-2013, in two speeches in Astana, Kazakhstan, and Jakarta, Indonesia, respectively.

Today, it is true that India is the largest beneficiary of AIIB financing for infrastructure projects. It is also true that between the issue of Indian membership in the Nuclear Suppliers Group, territorial tiffs in the Himalayas, concerns over the China-Pakistan Economic Corridor’s traversal of disputed territory in Kashmir, New Delhi has serious misgivings about Chinese foreign policy in its region generally and the Belt and Road Initiative specifically, regarding Beijing’s attempts to seek influence in its immediate neighborhood with great interest.

But there’s a fundamental distinction from New Delhi’s perspective that separates the AIIB from other BRI-related initiatives like CPEC and various China-financed projects in India’s backyard (think Hambantota, for instance). From India’s perspective, that China approached New Delhi in a consultative process over AIIB first made all the difference.

Last year, when India turned down an invitation from China to attend the inaugural Belt and Road Forum in May, the Indian Ministry of External Affairs put out a statement noting that India has a “firm belief that connectivity initiatives must be based on universally recognized international norms, good governance, rule of law, openness, transparency and equality.”

While it’s still debatable if the AIIB lives up to those high standards, New Delhi makes a crucial distinction in how it regards that institution, which is one of the earliest manifestations of the BRI. In a speech in 2016, former Indian Foreign Secretary S. Jaishankar explained what set the AIIB apart for India from the vast majority of other BRI projects:

All these endeavours feed into the changing connectivity scenario in Asia. The interactive dynamic between strategic interests and connectivity initiatives – a universal proposition – is on particular display in our continent. The key issue is whether we will build our connectivity through consultative processes or more unilateral decisions. Our preference is for the former and the record bears this out quite clearly.

He continued:

Wherever that option is on the table, as most recently it did in the AIIB, we have responded positively. But we cannot be impervious to the reality that others may see connectivity as an exercise in hard-wiring that influences choices. This should be discouraged, because particularly in the absence of an agreed security architecture in Asia, it could give rise to unnecessary competitiveness. Connectivity should diffuse national rivalries, not add to regional tensions. This is an issue that actually resonates beyond Asia because the rest of the world appreciates that the economic centre of gravity is shifting towards the continent. Indeed, if we seek a multi-polar world, the right way to begin is to create a multi-polar Asia. Nothing could foster that more than an open minded consultation on the future of connectivity.

Because India was asked to participate in the AIIB’s institutionalization process from the get-go, New Delhi regarded the project positively. Yes, the AIIB continues to be dominated by China, which maintains an effective veto over which projects are financed. But there’s scant evidence yet that the AIIB has been coopted into the BRI’s more geopolitically fraught initiatives, like CPEC or various predatory schemes, including Sri Lanka’s Hambantota port project. In the meantime, India has real infrastructure financing needs and the AIIB is as good a source as any to fill those needs.

So, for India, availing of the AIIB’s available financing is far from a hypocritical divergence from its broader criticisms of the BRI. For New Delhi, the problem isn’t China’s diversion of excess capacity toward fostering infrastructure development around Asia; rather, it’s the projects that attempt to do so with ulterior motives. This, too, is broadly what behind the newfound convergence of Asia’s so-called quadrilateral, with Japan, the United States, and Australia all seeking inclusive and sustainable modes of enhancing Asian connectivity.

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