Stakeholders laud AIIB’s $200 mn India investment

Asian Infrastructure Investment Bank (AIIB) has approved an equity investment of $100 million in India’s National Investment and Infrastructure Fund (NIIF), and said it would invest another $100 million in a second tranche. The bank’s board made this announcement before its two-day annual meeting in Mumbai on June 25 and 26. This is the first time that AIIB is holding its meeting in India.

Speaking at the meeting on Monday, interim finance minister Piyush Goyal said it was a matter of pride for India to be the largest shareholder in the multilateral development bank, and the recipient of the largest share of development funding from it.

“India is largest recipient of development capital and development funds. With over 25% of the fund commitment made so far by the AIIB of about $4.2 billion, we are the largest recipient,” Goyal said, adding that India holds 8% stock in the bank.

Goyal said the government’s focus for the past four years has been to create a framework that can boast of ease, simplicity, transparency, and sustainability to draw the biggest investors into the infrastructure space from across the globe.

India’s vision for infrastructure creation requires an investment of $4.5 trillion over the next 10 years, he said.

In a statement on Monday, AIIB said it will “provide expertise to enhance NIIF’s environmental and social risk management capabilities to improve and monitor environmental and social performance across the portfolio investments”.

Stakeholders from the Indian infrastructure space viewed the development as a huge boost to the segment. “This is an excellent step. A bank like AIIB making itself available is good news for infrastructure and transportation, especially for a company like us,” said Harj Dhaliwal, MD, Virgin Hyperloop One, Middle East and India. “Now we can see that AIIB has shown confidence in India, we will be keen to explore collaborations with the bank for projects in India.”

Hyperloop One is set to build a road connecting Mumbai and Pune in 25 minutes. The feasibility study for it is scheduled to be completed by July-end.

Market expert and banking analyst Ananth Narayan said the investment is a positive one. “$200 million is just a drop in the ocean. We still have a long way to go,” he said, adding that Goyal’s emphasis on continuity of government policies was also encouraging.

“Multiplying the money coming in from overseas has been a concern. That remains a struggle. We need to find a way to turn the funding coming in as a starting point for many other projects to bloom,” Narayan added.

AIIB remained optimistic that the $200 million investment will kickstart the process of multiplying the funds going forward.

“The NIIF will provide access to a diversified range of sub-funds and trigger a multiplier effect in attracting capital,” said AIIB director general of investment operations, Dong-Ik Lee. “With AIIB’s investment in the NIIF, we will help pool commitments from long-term investors such as multilateral institutions, sovereign wealth funds, pension funds and insurance companies, within and outside India, to make investments in the country’s infrastructure sector.”