Ajay Banga, the World Bank and the India story...

22 June 2023 by Sushovan Dhar

Ajay Banga, who brought KFC and Pizza Hut to India and made around INR 5.2 billion a day, took charge of the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

early this month. He has been greeted from all quarters. “The Board looks forward to working with Banga on the World Bank Group Evolution process,” World Bank said in a statement earlier. Banga was nominated for the office by US President Joe Biden in late February. He was the only contender to replace departing World Bank chief David Malpass. According to Oxfam, “The true test of Ajay Banga starts now: to reorient the World Bank to tackle the extreme inequality that robs billions of people of economic security and dignity. We need huge new investments in development but we need them to be publicly-led and purposed to lift people out of poverty —and we need guardrails around private finance that has run riot for too long.” [1]

His selection is additionally viewed as evidence of the growing inclusivity and diversity across international financial institutions. Commentators are thrilled to see this important victory for advancing diversity at the highest levels of leadership.

Vishwaguru, the world leader

This is undoubtedly cause for joy for Indians both at home and abroad, who are already rejoicing over the emergence of Kamala Harris and Rishi Sunak. The candidature of Indian-American business tycoon Ajay Banga as World Bank president has received praise and support from Nobel Laureates to global philanthropists and other notables. It is, no doubt, debatable if India qualifies as the world’s leader (“Vishwaguru”) with the world’s biggest queue for free food grains (approximately 810 million); falling employment and earnings; blatant inequality. According to the World Inequality Report 2022, the bottom 50% of Indian households own only 6% of the total wealth in the country. Meanwhile, the top 10% and 1% own, respectively, 65% and 33% of the total wealth [2].Nevertheless, some Indians have achieved international success. They are the stuff of legends, which struggling middle-class parents fantasise about as they push their own children to achieve success.

Meanwhile, the media is buzzing over his net worth of $206 million in 2021, which is more than INR 17 billion, and his salary of INR 5.2 million a day as a former Mastercard CEO. It’s a mystery how successful people like him spend their money. After all, he can’t wear two awfully expensive shirts over each other. But no one discusses how credit card companies employ “unavoidable transactions” to cut their customers’ throats. Few would contest that Banga will now serve the interests of a select group of Global North nations as president of the World Bank, forcing American capitalist hegemony down the throats of obstinate black and brown people by whatever means necessary.

Ajay Banga’s promotion to the top position, at this important moment, can be viewed as a “fair” step in that direction while the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). is actively discussing the chances of reforming the Multilateral development banks like the World Bank and IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

during India’s chairmanship. Indeed, Ajay Banga was born in India but let’s not forget that he obtained US citizenship, which is one of the reasons why he might be selected for the presidency. The IMF and World Bank have historically had European presidents and American presidents, respectively. The United States, its allies, major corporations, and the richest 1% of the global population continue to need an American to protect their interests.

The World Bank takes pleasure in its dual objectives of eradicating extreme poverty and sustained promotion of shared prosperity. However, its most recent president lack any background either in environment and climate related issues or about “development” policy. Ajay Banga is primarily recognised for his connections to big business and finance, and his history as the CEO of significant financial organisations like Citigroup and Mastercard amply demonstrates that, during his tenure, he will continue to support an extractivist capitalist system through neoliberal loans and World Bank-imposed conditions.

Mastercard and the story of inclusion

Ajay Banga’s tenure at Mastercard is hailed for championing inclusive growth and financial inclusion through the establishment of the Center for Inclusive Growth. According to some, this initiative aimed to promote equitable economic development and expand access to financial services for underserved communities worldwide [3]. The organisations claims to have brought in 1 billion people, 50 million merchants and 25 million women entrepreneurs into the digital economy [4]. A careful review of Mastercard’s financial inclusion stories will help us unravel the real mystery. “As part of his effort to bank 500 million unbanked poor people across the world, Banga partnered with the South African Social Security Agency (SASSA) and Net1, to use MasterCard debit cards for welfare grant distribution. This new debit card payment system was meant to assist low-income South Africans to avoid long waits at government offices in the hot sun (the source of many deaths of older people), protect them from the petty criminals who stole from grant recipients at paypoints, and diminish the costs of distributing cash, saving the government money [5].”

However, while Mastercard had rapidly rolled out 10 million cards, “Net1 was building subsidiary companies to sell financial inclusion products to grantees, including loans (Moneyline), insurance (Smartlife), airtime and electricity (uManje Mobile) and payments (EasyPay).

As a monopoly service provider, Net1 controlled the entire grant payment stream from the state Treasury to recipients. It was well positioned to not only transfer the grant payments, but to sell financial products and extract repayments at the same time as grant payments were made.

There was no possibility for grantees to default on their debts because repayments were deducted automatically, and no longer depended on consumer behavior. As repayments to Net1 whittled away the promised value of social entitlements, grantees turned to other formal and informal lenders, many of whom were also repaid automatically through Net1’s same debit-order powers.

While Net1 claimed to offer credit without interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. , their monthly “service fees” were typically over 5% interest per month. Though technically allowable under the National Credit Act, these interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
 amounted to over 30% on a standard 6-month loan. At the time, interest rates on a credit card were slightly over 20% per year. Through their high-priced credit, Net1 gained more income from financial inclusion products than from the distribution of social grants from 2015-17.4
 [6]” Today, billions of low-income households have acquired bank accounts and started receiving cash transfers at the same time. This has created a new existential situation known as structural indebtedness in addition to making it possible to obtain loans, which are now seen as a new kind of social “right” in the wake of the so-called microfinance empowerment wave.

This indicates the emergence of a new, even more heinous, and wretched form of poverty, one that results from the exploitation of those who are most vulnerable, forcing them to perpetually turn to ever-rising debt levels in order to pay off previous debts and survive. High rates of indebtedness among the working poor and the most disadvantaged have emerged as a worrying social problem throughout the world’s poorest nations, as well as in middle-income economies like South Africa and Brazil.

This shows how dramatic the Bank’s presidential appointment of Banga will be, even more so now that tackling the climate crisis urgently calls for a new generation of eco-social policies that truly and equitably meet the needs of those who continue to pay – in the Global South – for the mistakes of failed development policies and the Global North’s overconsumption of greenhouse gases.

IBRD (International Bank for Reconstruction and Development) decisions must be approved by 85% of the voting members. However, the United States has a de facto veto power because it holds 15.47% of the voting rights for each of the crucial decisions. Therefore, there won’t be any substantive changes within the World Bank. Whether or not it is led by a US citizen from big industry and finance, it will always be an institution serving the interests of the US as long as it exists. It will keep giving out loans, which are typically burdensome, in exchange for clauses that uphold and deregulate capitalism, widen social and gender gaps, and exacerbate the ecological and climate crises.

The myths of Indian at the top

Even though we witness a series of people from Indian origin occupying top It is time to understand that the heads of multi-nationals necessarily look after the interests of their masters. They did originate from India, but interests and loyalties are all that matter. The hands of the United Kingdom’s Prime Minister Rishi Sunak will not tremble if he has to decide on a policy that would favour the UK over India. Similarly, in these four years, India has gained not a whit because the vice president of the United States is of Indian origin, however remote and underplayed or overplayed.

It may, therefore, be wiser to view Banga’s appointment or Sunak’s with maturity and balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. . After all, their “Indianness” is a legacy they carry mainly because their skin colour or surnames do not permit otherwise. But their acquisition of economic or political power – to dizzying heights – is theirs alone.

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