World Economy

Global Investors Cautious on India Investments

Global Investors Cautious on India InvestmentsGlobal Investors Cautious on India Investments

Even as India is “aggressively” trying to attract funds for the Rs 40,000-crore (almost $6 billion) National Investment and Infrastructure Fund, global investors are likely to adopt a “cautious” approach over investing in it, a report by BMI Research has said.

The company, part of the Fitch Group, said infrastructure sector in the country continues to face challenges, which is discouraging international investments, PTI reported.

“Indian government is aggressively trying to attract foreign investments into its infrastructure sector, seeking $1 trillion in investments, however, we expect that international investors will continue to remain cautious over investing in the fund which seeks to fill the funding gap in India,” the company said in its latest report.

Till date, the NIIF has secured support through memorandum of understandings with sovereign wealth funds including Russia’s Rusnano, Abu Dhabi Investment Authority and Qatar Investment Authority, it added.

However, BMI Research said, “While encouraging that there is interest in the fund, there is yet to be any formal commitment of capital.”

The Indian government created the NIIF in last December as an investment vehicle for funding commercially viable greenfield, brownfield and stalled projects.

While the government will invest Rs 20,000 crore ($3 billion) in NIIF, the remaining amount will come from private investors.

BMI Research further said, “The potential of India’s $6 billion NIIF will not be fulfilled in the short-term, even as projects are selected for investment.

  Various Challenges

“Crucially, the Indian infrastructure sector continues to present various challenges hindering the attraction of the market for international investors.”

On the reasons behind the lack of interest from global investors in investing in NIIF, it said that it is likely on account of India’s investment outlook, which remains challenging.

“The country scores below regional average in both our Operational and Project Risk Index, with particularly low score for Crime and Security Risk and Construction Risk, highlighted by the fact that a third of projects—worth a combined value of $210 billion—are delayed,” it said.

However, BMI Research expects India’s construction and infrastructure sectors to grow by an annual average of 6.4% between 2016 and 2025.

 US Claims

Blaming India for not being ambitious enough to conclude Bilateral Investment Treaty, the US said it remains open to continuing dialogue as it is important for both the nations.

“To be frank, we are far apart on number of issues with regard to trade and investment with India. We feel our colleagues in India have not been as ambitious (on concluding BIT) as we want them to be but we remain open,” Deputy Assistant to the US President and Deputy National Security Advisor for International Economics Adewale (Wally) Adeyemo said in New Delhi at a session on India-US Economic Relations. Adeyemo added that US knows that India is one of the fastest growing economy in G20 and the US wants to be involved with India going forward.

Last month, US Ambassador to India Richard R. Verma had said India and the US are targeting a four-fold jump in bilateral trade to $500 billion in the near future.

US bilateral investment to India has grown from a mere $8.5 billion in 2005 to over $35 billion last year, he said.