During the recent BRICS (Brazil, Russia, India, China, and South Africa) meet, India proposed an expansion of NDB’s (New Development Bank) scope to fortify Social Infrastructure and promote industry. Social Infrastructure encapsulates the construction and maintenance facets of facilities that support social services such as healthcare, education, and housing. This year, India holds the chair of the BRICS group.
About NDB: Background and Objectives
The NDB is a multilateral development bank founded by the BRICS countries during the 6th BRICS Summit in Fortaleza, Brazil, in 2014. The bank’s creation aimed to back infrastructure and sustainable development ventures in BRICS and other underserved, budding economies for accelerated development through groundbreaking technology and innovation. Headquartered in Shanghai, China, NDB saw recognition in the United Nations General Assembly as an observer in 2018.
The objectives of this bank include supporting economic growth, fostering the development of member nations, facilitating job creation, and creating a knowledge-sharing platform amongst developing countries. To achieve these goals, the Bank employs various financial instruments, including loans, guarantees, equity participation in public or private projects.
Illustrative Projects Funded by NDB in India
The NDB has committed to funding several significant infrastructure projects in India, including the Mumbai Metro rail, Delhi-Ghaziabad-Meerut Regional Rapid Transit System, and various Renewable Energy projects. Thus far, it has approved 14 Indian projects, amounting to nearly USD 4.2 billion. In 2020, India proclaimed a 1 billion USD loan pact with NDB focused on boosting rural employment and infrastructure.
Noteworthy Achievements
NDB has achieved notable innovations, such as local currency lending to shield borrowing countries from a stronger dollar. The bank also maintains partnerships with other significant development banks like the Latin American regional development bank CAF, China-led Asian Infrastructure Investment Bank, and World Bank group. Despite facing economic hardships domestically, NDB boasts a strong credit rating of AA+. The bank has also emitted numerous bonds, including ‘green bonds’, and has sanctioned over 42 projects in member countries totaling USD 12 billion.
Persistent Issues
NDB faces pressing issues, such as lesser disbursal of loans when compared to approvals, which stands at less than USD 1 billion. Additionally, political turmoil in member countries namely China, Russia, South Africa, and Brazil, poses a challenge towards its operational efficiency. The bank is also embroiled in controversies related to sustainability criteria, with some environmentally questionable projects being labeled as sustainable.
The Way Forward
Heading into the future, NDB must prioritize building healthcare capacities and national health preparedness for its member nations and other vulnerable countries, with particular regard to the containment of Covid-19 spread. A medium-term perspective should focus on investments to reinforce urban resilience to mitigate adverse impacts of air pollution and adapt to climate change. In a long-term view, lending support for renewable energy technologies should be crucial to improve their inclusion within the energy mix of BRICS nations and beyond. To maintain long-run financial sustainability, the Bank should explore public-private partnership mechanisms.