Context: Recently, the China-backed Asian Infrastructure Investment Bank (AIIB) said it will function as an “apolitical” institution and will continue to support projects in India, which has received the most funding of any country from the bank.
India and AIIB

• India was among the AIIB’s 57 founding members in 2016.
• It is also its second-largest shareholder (with 7.62% voting shares) after China (26.06%).
• It has received USD 4.35 billion from the Bank.
• This is the highest of any country, with the bank so far approving loans of USD 19.6 billion to support 87 projects in 24 countries.
• Turkey is second with USD 1.95 billion.
• AIIB has approved financing projects in India in a host of sectors like energy, transport and water including the Bangalore metro rail project (USD 335 million), Gujarat rural roads project (USD 329 million) and Phase 3 of the Mumbai urban transport project (USD 500 million).
• In a recent virtual meeting, India said that it expects AIIB to introduce new financing instruments, provide financing for social infrastructure and to integrate development of climate resilient and sustainable energy access infrastructure into AIIB’s recovery response to the Covid-19 crisis.
• This implies that India is unlikely to alter its engagement with the China-led Asian Infrastructure Investment Bank (AIIB), despite a host of offensive measures announced recently to reduce its trade and investment links with China.

Chinese Angle

• In June 2020, AIIB approved USD 500 million for Covid-19 Emergency Response Fund and Health Systems Preparedness Project and another USD 750 million for Covid-19 Active Response and Expenditure Support, in a co-financing arrangement with the Asian Development Bank (ADB).
• USD 750 million loan was approved two days after the clash in Galwan Valley in Ladakh along the India-China border.
• It has supported several projects under the Belt and Road Initiative (BRI) framework, but is not formally linked to the plan.
• India has concerns over the China-Pakistan Economic Corridor - a part of the BRI.

About the AIIB

• The AIIB is a multilateral development bank with a mission to improve social and economic outcomes in Asia.
• It is headquartered in Beijing and started operations in 2016.
• The bank invests in sustainable infrastructure and other productive sectors in Asia.
• India is a member of the bank and has the second-largest shareholding and voting rights after China.

AIIB Goals

• To promote sustainable economic development, create wealth and enhance infrastructure connectivity in Asia.
• To augment regional cooperation and partnership.
• To boost investment in the public and private capital for development purposes.
• To promote private investment in projects, activities and businesses contributing to economic development in the region.
• Membership to the bank is open to all members of the Asian Development Bank or the World Bank.
• The bank also allows non-sovereign entities to apply for membership provided their home countries are members.