Infra needs make India hot spot for development banks

India has become the main focus of the two newest players in multilateral developmental financing as they are gearing up to make their mark in the burgeoning infrastructure needs of the country.

Both the Brazil, Russia, India, China, South Africa (BRICS) nation group-backed New Development Bank (NDB) as well as the Asian Infrastructure Investment Bank (AIIB) are pumping in funds into India for financing critical ground level infrastructure projects across the country.

This focus on India may ensure that the AIIB board of governors will get a warm reception on Monday when they assemble for their third annual meet in Mumbai.

The Beijing headquartered bank, set up in January 2016, has so far financed six projects in India at a total cost of $1.21 billion. It’s also expected to signal the final approval of a further $1.9 billion during the two-day meet.

Of the total 26 projects that the AIIB has undertaken across Asia, so far India has generated most of the attention. The country has received the highest number of projects, beating Bangladesh and Oman, which got two each and leaving neighbour China way behind with only a single sanctioned project.

“The bank will be funding a major irrigation and flood management project in West Bengal apart from infra requirements in the under construction Amravati, the capital of Andhra Pradesh,” a senior official from West Bengal said.

But the AIIB has serious competition from the KV Kamath-led NDB, the financing arm of the BRICS nation grouping.

The NDB has so far sanctioned four projects in India worth $1.4 billion in transportation infrastructure and ground level renewable energy projects. The multinational bank that started operating in July 2015 had a slow start initially. However, it has approved more than $5.1 billion worth of loans across all the five-member states since then.

The NDB has so far also sanctioned four projects in China, three in Russia and one each in South Africa and Brazil.

An additional four projects across India are currently under various phases of procurement and tender.

This includes the Madhya Pradesh bridges’ project, which seeks to finance 23 sub-projects of building bridges across 31 districts. The state has remained the largest beneficiary of NDB loans so far and will also receive funds to overhaul road infrastructure in seven districts across the state.

The NDB is also financing road construction totalling more than 160 km across more than a dozen districts in Bihar.

The Modi government has ramped up investments in the infrastructure sector, most notably through Bharatmala – its flagship programme to construct more than 60,000 kms of national highways.

“However, there are dozens of individual infra projects, which are acting as missing links in the logistics chain and these require specific funding and implementation. That’s where the banks come in,” a senior official said.

According to the Global Infrastructure Outlook, India has infrastructure investment requirement of $4.5 trillion with road construction and development requiring almost $589 billion. India will face a $526 billion infrastructure investment gap by 2040, according to the latest Economic Survey.