How India Can Become the Bank for the Global South

Why in News?

• In 2007, China’s GDP was about $3.6 trillion and today, India’s GDP is $3.7 trillion or perhaps more.
• This comparison sets the stage for a pivotal moment in Indian diplomacy spearheaded by the current dispensation.
• As India concludes its transformative diplomatic year in 2023, marked by its G20 presidency, it’s important to assess the lessons from China’s geopolitical ascent post-2008 financial crisis.

An Analysis of China’s rise to Geo-economic Prominence

• China Provided Institutional Responses During Financial Crisis
  • In 2007, China was not yet the geo-economic power what it is now. But with a GDP lower than India’s today, it became the go-to nation during the global financial crisis a year later.
  • Every nation sought to deepen relations with Beijing, and to create a special place in their diplomacy for the People’s Republic.
  • The reason behind this was that China provided institutional and geo-economic responses which include a development bank, a cross-continental lending programme.
  • These programmes galvanised infrastructure layer without the legacy constraints of Western agencies, and a series of economic projects that eventually coalesced into the Belt and Road Initiative.
• China Offered a Vital Alternative Outside Western World
  • China utilized its economic promise in 2008 to garner enormous economic and political influence, which has served it well ever since.
  • It did this by offering itself as a vital additionality to the global order.
  • At a time when the US was struggling to recover from the financial crisis and the Eurozone was tearing itself apart, it was China that promised stability and economic dynamism.
  • The world wanted and needed an additional engine of growth and an additional source of investment.
  • And therefore, the world also welcomed an additional centre of geopolitical power in form of China.

Does India Have the Similar Resources to Follow China’s Ascent Trajectory?

• India Can Exert Huge Influence
  • India is poised at a similar moment and with a similar GDP. As India enters 2024, this is the framework within which Indians must understand their place in the world today.
  • The recent past teaches us that an India-sized economy of about $4 trillion can exert a huge influence.
  • With vision and skilful diplomacy, it can carve a space for itself alongside economies that are four or five times large, like the United States, the European Union and China.
• India is Placed in a Unique Situation: This is a real Indian opportunity in 2024, as Europe stagnates, the US turns inward and China deals with internal problems and its share of the global economy is shrinking in nominal terms. 

Agendas of India’s Next Government in Coming Years

• Information Technology (IT) and Innovation
  • The work for the next government should be to demonstrate India’s potential on the global stage similar to what China did in 2007 and during 2008 financial crisis.
  • India has established itself as a global IT hub, with a strong presence in software services and technology.
  • This sector contributes significantly to exports and economic growth. It still has a lot of potential which take India’s IT export to new level.
• Further Boost Entrepreneurship and Start-ups
  • India has witnessed a surge in entrepreneurship and a burgeoning start-up ecosystem.
  • The government has taken initiatives to support start-ups through policies and funding, fostering innovation and economic growth.
  • India has now almost more than 100 Unicorns and the number continues to grow.
• Leverage Strategic Location
  • India's geographical location gives it a strategic advantage for international trade.
  • It serves as a gateway between the Middle East, Europe, and Asia, facilitating global economic interactions.
  • With India-Middle East Europe corridor, India’s importance is only going to rise and provide an alternate route of trade to ME and further Europe.
• Take On Key Reforms and Policies
  • The Indian government has implemented economic reforms to improve the business environment, ease of doing business, and attract foreign investment.
  • Initiatives like Make in India and Goods and Services Tax (GST) aim to streamline processes and boost economic activity.
  • Future governments should build on these reforms.

Additionalities India Can Offer on the Lines of China

• India’s Additionalities Need Momentum Unlike Chinese Case
  • India's Trajectory and Momentum Additionality, as witnessed in China's case, does not demand extraordinariness but momentum.
  • India possesses its trajectory, propelled by a green and digital future, contrasting China's mass manufacturing dominance in the 2010s with its platform economy driving the 2020s.
• Need A Systematic Approach While Offering Additionalities
  • The additionality India seeks must embody attributes like China's approach 15 years ago.
  • A systematic roadmap outlining India's proposition becomes crucial, resonating with partners and signalling that a $4 trillion economy is poised to exert influence on par with a $15 trillion one.
• A Dedicated Bank for Global Engagement
  • India emerges as a major source of development finance; it necessitates an outward-focused development finance corporation akin to China's model.
  • A dedicated bank, on the lines of the China Development Bank, should cater to global corporate needs beyond trade finance.
  • This financial initiative should be bolstered by a distinct imagery that resonates globally.
• External Engagement Approach
  • Collaborating with like-minded partners, it should strategically map priority infrastructure, connectivity routes, business hubs, and developmental projects.
  • 2024 is being seen as the year to finalise a comprehensive world map outlining India's vision for its global role.

Conclusion

• As India stands at the cusp of a transformative period in 2024, its ability to channel its economic momentum into a global force will determine its place in the evolving geopolitical landscape.
• The lessons from China's rise underscore the importance of a strategic roadmap, systematic approach, and visionary diplomacy to reshape the global order.
• India's journey towards becoming the bank of the Global South centres around its capacity to provide additionality in global growth, institutions, and security.

Q1) What is the objective of China Development Bank (CDB)?

CDB devotes itself to facilitating the implementation of macroeconomic control policies through medium- and long-term investment and financing activities, supporting the national economy at times of economic difficulty without interfering with the market during boom periods.

Q2) What is the Belt and Road Initiative (BRI)?

China's Belt and Road Initiative (BRI) development strategy aims to build connectivity and. co-operation across six main economic corridors encompassing China and: Mongolia and. Russia; Eurasian countries; Central and West Asia; Pakistan; other countries of the Indian subcontinent; and Indochina.

Source: The Indian Express