In response to a dramatic 62% drop in net foreign direct investment (FDI) to India in FY24 and an impending crisis in securing non-budgetary funding for infrastructure projects, the Center is developing a multifaceted action plan aimed at luring $50 billion more in long-term foreign capital each year. The goal is to access patient financing in the form of both loan and equity.
Official sources claim that negotiations have started with a number of jurisdictions where finance money is stashed, including the US and important European countries. According to the sources, a complementary strategy is to establish a few Funds under the National Investment and Infrastructure Fund (NIIF) to aggregate investments in certain infrastructure projects. The action plan, according to the sources, entails preparing a number of sizable "investible projects," where investors won't have to worry too much about return on investment because potential investors have expressed worries about the bankability of some of India's large-scale infrastructure projects.
The Center is focusing on foreign investment in more recent fields including green energy enterprises like solar, wind, and green hydrogen, as well as national roadways and railways, which are now sponsored through the budget.
According to the sources, the exercise involves several departments, including the Ministry of New and Renewable Energy (MNRE), the Department of Economic Affairs, and the Department for Promotion of Industry and Internal Trade (DPIIT), in order to guarantee that investible project pipelines are easily made available. Sectors are currently being recognized. One of the representatives stated, "There will be a multifaceted approach to get more patient funds."
Due mostly to increased repatriation, net foreign direct investment (FDI) decreased from $28 billion in FY23 to $10.6 billion in FY24. On the other hand, gross inward FDI decreased slightly from $71.4 billion to $71 billion in FY24. More than 80% of the flows to India in FY24 came from Singapore, Mauritius, the US, the Netherlands, Japan, and the UAE.
Foreign investors are very interested in investing in greener, sustainable infrastructure. Another source stated, "We have an agreement with the US and Europe is also willing to invest in such projects."
While India gradually reduces the growth of public capital expenditures in order to achieve fiscal consolidation, the government has started negotiations with a number of nations in order to come to an agreement to channelize a portion of their substantial patient capital pool. In order to attract international investors, particularly sovereign wealth funds, NIIF is considering establishing two funds. A country-specific fund and a general-purpose fund are the two types of funds, according to the second official.
With four funds—the Master Fund, Private Markets Fund, Strategic Opportunities Fund, and India-Japan Fund—each with a unique investment strategy dedicated to assisting the nation's growth requirements, NIIF now oversees approximately $4.9 billion in equity capital commitments.
To ensure that projects are bankable and investible, government departments will work together to expeditiously identify and resolve new investment-related difficulties.
India's economy, which is now the largest in the world with the highest rate of growth, is expected to reach $5 trillion in GDP from $3.7 trillion in FY24, making it the third largest in three years. According to IMF projections, India is expected to attain the milestone by 2027–2028.
With four funds—the Master Fund, Private Markets Fund, Strategic Opportunities Fund, and India-Japan Fund—each with a unique investment strategy dedicated to assisting the nation's growth requirements, NIIF now oversees approximately $4.9 billion in equity capital commitments.
There is a larger finance vacuum that has to be bridged since Indian banks are being instructed to take their time financing projects. India is estimated to need to invest close to $2 trillion in infrastructure between now and 2030.
