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India's Membership for European Bank for Reconstruction & Development : Civil Services Mentor Magazine: JANUARY - 2018

::India's Membership for European Bank for Reconstruction & Development::

The European Bank for Reconstruction and Development (EBRD) was established to help build a new, post-Cold War era in Central and Eastern Europe. It has since played a historic role and gained unique expertise in fostering change in the region - and beyond.The EBRD is committed to furthering progress towards ‘market-oriented economies and the promotion of private and entrepreneurial initiative’. This has been its guiding principle since its creation at the beginning of the 1990s and, new challenges and the welcoming of new countries to the EBRD world notwithstanding, will continue to be its mission in years to come.
The EBRD was set up in haste to meet the challenge of an extraordinary moment in Europe’s history, the collapse of communism in its East. In fact, a mere 18 months elapsed between the first mooting of the idea of a European bank, by President François Mitterrand of France, in October 1989 and its opening for business with headquarters in London in April 1991.Urgency and the ability to respond to momentous events swiftly and decisively, whether it be the end of the Soviet Union, financial crises or the ‘Arab Spring,’
have been among the EBRD’s hallmarks from the start.
During the frenetic years of the early 1990s the EBRD’s emphasis on the private sector as the main driver for change in Central and Eastern Europe was vindicated many times over. This was the period that
established the EBRD’s reputation as an expert on transition to the open market.It was heavily involved in areas such as banking systems reform, the liberalisation of prices, privatisation (legislation and policy dialogue) and the creation of proper legal frameworks for property rights, all vital ingredients for change.
Uniquely for a development bank, the EBRD has a political mandate in that it assists only those countries ‘committed to and applying the principles of multi-party democracy [and]pluralism’. Safeguarding the environment and a commitment to sustainable energy are also central to the EBRD’s activity.The EBRD serves the interests of all its shareholders - 66 countries from five continents plus the European Union and the European Investment Bank - not just those countries which receive its investments (€9.4 billion in 2016). We all stand to gain from the EBRD region’s closer and deeper integration into the global economy. The Union Cabinet chaired by the Prime Minister Narendra Modi has approved India's Membership for European Bank for Reconstruction & Development (EBRD). Necessary steps will be initiated by the Department of Economic Affairs, Ministry of Finance to acquire the membership of the EBRD. The issue relating to acquiring the membership of the "European Bank for Reconstruction & Development (EBRD)" had
been under consideration of the Government. With the country's impressive economic growth over the years and enhanced international political profile, it was considered appropriate that India should expand its presence on the global developmental landscape beyond its association with the Multilateral Development Banks (MDBs) such as the World Bank, Asian Development Bank and African Development Bank. The decision to join the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) was taken earlier in this backdrop.

What will be its Impact:

Membership of EBRD would enhance India's international profile and promote its economic interests. Access to EBRD's Countries of Operation and sector knowledge.

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India's investment opportunities would get a boost.
It would increase the scope of cooperation between India and EBRD through co-financing opportunities in manufacturing, services, Information Technology, and Energy.
EBRD's core operations pertain to private sector development in their countries of operation. The membership would help India leverage the technical assistance and sectoral knowledge of the bank for the benefit of development of private sector.
This would contribute to an improved investment climate in the country.
The membership of EBRD would enhance the competitive strength of the Indian firms, and provide an enhanced access to international markets in terms of business opportunities, procurement activities, consultancy assignments etc.
This would open up new vistas for Indian professionals on the one hand, and give a fillip to Indian exports on the other.
Increased economic activities would have the employment generating potential.
It would also enable Indian nationals to get the employment opportunity in the Bank.

Financial Implications of the membership:

The minimum initial investment towards the membership of EBRD will be approximately €1 (one) million. However, this assumption is based on India deciding to buy the minimum number of shares (100) required for obtaining the membership. If India were to buy a higher number of Bank shares, the financial implications could be higher. In-principle approval of the Cabinet at this stage is being obtained for joining the Bank.
The membership would help India leverage the technical assistance and sectoral knowledge of the bank for the benefit of development of private sector. It will also help enhance the competitive strength of Indian firms and provide an greater access to international markets in terms of business opportunities, procurement activities and consultancy assignments. This would open up new vistas for Indian professionals on the one hand, and give a fillip to Indian exports on the other.The membership will also enable employment opportunities at the bank for Indians.