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By Raymond E. Vickery, Jr and Michael Kugelman
The United States’ reaction to China’s AIIB will be a setback for its cooperation with India. It’s not too late to fix this.
During his first year in office, Prime Minister Narendra Modi has articulated his vision of Indian economic development to almost anyone who would listen – perhaps most notably to presidents Barack Obama and Xi Jinping. “Make in India,” electricity in every village, modern sanitation, and rising standards in health, education, and individual prosperity are all part of the Indian future according to Modi. With Obama’s visit to New Delhi earlier this year, U.S. support for this vision is now the cornerstone of U.S.-Indian relations. However, when Modi visits Xi next month, they will discuss India’s benefits from China’s new Asian Infrastructure Investment Bank (AIIB) and what India may receive from the $62 billion China has just announced for its “new Silk Road” infrastructure initiative.
Under these circumstances, the U.S. Congress has blocked the effectiveness of the most vital institutions for U.S engagement with India on infrastructure development. The Obama Administration has compounded the error through a futile effort to hamstring China’s attempts to provide a source of additional infrastructure financing through the AIIB. The U.S. effort has been rejected by India and 55 other nations, including some of America’s closest allies. Surely, this constitutes a self-inflicted wound—a shot in the foot.
Modi’s vision of exponential economic growth simply will not occur unless India can fix its infrastructure problem—the Achilles heel of the Indian growth story. The most pressing need is for energy infrastructure to rectify the rolling power cuts that have become endemic. Not far behind is transportation, where India wastes vast amounts of productivity through delays in moving people and goods to, from, and around the country. The Asian Development Bank estimates that Asia will need to invest about $800 billion a year on infrastructure through 2020. The previous Indian government estimated India’s share of that needed investment at about $200 billion a year.
Read the full story at The Diplomat