What are the main functions of the EBRD? Recently India has become member of EBRD, what benefits will India derive from its membership? (10 M)

Mentor’s Comment:

India has become the 69th shareholder of the European Bank for Reconstruction and Development (EBRD). This has a lot of potential for Indian companies as it will open up opportunities for them in places such as Central Asia, Turkey and Georgia.

Introduction should discuss about the EBRD and its main function.

Further, mention about India’s desire for membership in Global Banks. This is to have increased participation in global trade as well as global development participation.

Further, mention the benefits that India will derive from its membership. Like enhancing international profile, promoting economic interests, investment opportunities and co-financing in manufacturing, services, IT and energy etc.

Conclude with more enhanced positive note base on the contents of main part.

Model Answer:

India has become the 69th shareholder of the European Bank for Reconstruction and Development (EBRD). This has a lot of potential for Indian companies as it will open up opportunities for them in places such as Central Asia, Turkey and Georgia.

What is the ‘European Bank for Reconstruction and Development – ‘EBRD’

  • The European Bank for Reconstruction and Development (EBRD) is a bank that was established in 1991 to aide ex-Soviet and Eastern European countries transitioning into democracies by developing free market economies.
  • The EBRD is publicly-owned by shareholders in 61 countries and only supports countries committed to democratic principles.

Main functions of EBRD?

  • EBRD promotes environmentally sustainable development. It will not finance activities or projects related to the tobacco industry, defence, certain alcoholic products, stand-alone gambling facilities or substances banned by international law.
  • The EBRD also helps facilitate the transition of public companies to becoming privately-held entities as well as restructuring state-owned firms and helping to improve municipal services.
  • The EBRD offers financing in the form of equity financing and loans, leasing facilities, trade financing, professional development, guarantees and other support programs.
  • It finances both large and small projects, with smaller projects typically being financed indirectly through intermediaries.
  • Some of these smaller projects include micro-business banks, commercial banks, leasing facilities and equity funds.
  • The EBRD offers financing intended to support the establishment and development of the private sectors of formerly communist and Eastern Bloc countries, including working to help privatize companies that were previously public-owned.

India’s desire for Membership in Global Banks:

  • 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 Multi-lateral 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.

Benefits that India will drive from its Membership:

The Indian government on its part is looking for the following benefits:

  • Membership of EBRD would enhance India’s international profile and promote its economic interests. Access to EBRD’s Countries of Operation and sector knowledge.
  • 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.
  • The EBRD also works closely with leading Indian chambers such as the Confederation of Indian Industry, and the Associated Chambers of Commerce and Industry of India.
  • It recently signed a Memorandum of Understanding with the Federation of Indian Chambers of Commerce and Industry.
  • In 2017, the EBRD signed an accord to strengthen ties with the International Solar Alliance, which was launched during the 2015 UN Climate Change Conference in Paris at the initiative of Indian Prime Minister Narendra Modi and former French President François Hollande as a platform for cooperation among solar resource-rich economies.
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