The Finance Ministry has caused ripples in economic diplomacy circles by asking Reliance-supported think-tank Observer Research Foundation (ORF) to draft strategy papers for India’s position in the G20 on the BRICS (Brazil, Russia, India China, South Africa) Development Bank.
The structure, location of its headquarters, membership, authorised capital stock and distribution of voting rights across member countries of the BRICS Development Bank will be taken up at the next BRICS Ministerial summit due to take place in Brazil. The date for the summit will be finalised after the India's general election dates become known. Later this month, Economic Affairs Secretary Arvind Mayaram will attend a meeting of the BRICS Common Functionaries where the proposal on the Development Bank will be readied for putting up to the Ministerial.
At the Durban Summit in March 2013, the BRICS countries had decided to set up a Development Bank for funding infrastructure projects. The BRICS Development Bank will also create a Contingency Reserve Arrangement worth $100 billion that member countries will be able to tap should they have to counteract financial shocks in future such as the one caused by the Lehman Brothers collapse.
“It is rare for the Finance Ministry to seek inputs into policy issues pertaining to economic diplomacy from a think tank so closely associated with a private company,” highly-placed sources told The Hindu.
The ORF strategy paper with the Finance Ministry proposes four options for India’s position on the structure and ownership model for the BRICS Development Banks. Two of these include allowing private sector companies to own part of it alongside owner countries. “Private sector companies owning a part of a multilateral international body alongside sovereign countries would be odd though not completely unheard of,” the sources said.
The option will open avenues for investing in real development projects for private companies, the ORF input says. It also adds that the downside of “allowing private entities or individual investors and giving them voting rights raises the risk of these players voting for personal or private gain”.