British Prime Minister, Theresa May, visited India at the invitation of Prime Mister Modi on 6th November; and infrastructure was high on her agenda.
This was her first bilateral visit outside Europe after taking over as Prime Minister in the aftermath of the Brexit Referendum, and it was self avowedly intended (by both politicians) to strengthen existing strategic partnerships between the two countries.
In its Press Release issued on 7th November the British Government emphasised the central role to be played by infrastructure investment:
“United Kingdom finance and expertise will help deliver key Indian priorities like infrastructure development, renewable energy and future smart cities….The two Prime Ministers agreed to accelerate the deepening partnership between the United Kingdom and India in financing investment in Indian infrastructure.”
Is that all just pie in the sky?
Well, in a word: no.
Over $1 Billion of Rupee denominated Bonds (INR 7,500 crore) have been issued in London since July 2016 (a mere four months); The National Highways Authority of India and the Indian Railway Finance Corporation will each be issuing Rupee Denominated Bonds in the next few months and Indian Energy Efficiency Services and the Renewable Energy Development Agency will be issuing so-called Green Bonds (including rupee denominated Masala bonds) on the London Capital Markets over “the next few weeks”. Technical assistance is already being provided as well for the redevelopment of Varanasi Railway Station as part of the Varanasi Smart City Development Plan.
But the really encouraging this is that all this new funding, energised by a raft of new policy initiatives will key in closely with what is already an admirably focused and managed Indian infrastructure climate.
Just take a couple of examples.
First, on 11th November, Indian Road Transport Minister Nitin Gadkari announced plans for an investment programme of Rs 25 Lakhe Crore over the next five years; his ministries have already awarded contracts worth Rs 3.17 lakh crore in roadworks on the subcontinent, where the pace of construction is currently 22 km per day, targeted to rise to 40km per day. The highways construction target for the current fiscal year is 15,000 km of which 3,600 had been completed by the end of October.
Then, on 10th November, the Indian Railway Minister, Suresh Prabhu, announced an investment of over Rs 5,000 crore to redevelop Guwahati Station where the plans will include construction of an all-new 12 km long section of elevated track. Indian Railways is to enter into a new joint venture with the state government so as to implement the project: “The three stations in Kamakhya, Guwahati and New Guwahati will be connected to metro line and the entire project will contribute to the smart city project”, Prabhu commented when launching the scheme.
The United Kingdom has its own foreign policy and domestic issues to grapple with in the post Brexit Britain, and in many ways it is unsurprising that it should have reached out so soon to India, one of its oldest and most important trading partners, as it seeks to nurture links with the wider world beyond Brussels; but these things have a certain chemistry of their own. The sheer scale of the new finance which is to be raised through bond issues of the type signalled by the two Governments this month, would not in itself be enough to kick start the infrastructure sector on the subcontinent; but it doesn’t need kick starting, it is already moving forward and those having stewardship of its planning certainly can’t be accused of lacking ambition.
And capital funding on substantial scale contemplated by London and New Delhi this month really can then make a difference.
Red Ribbon CEO, Suchit Punnose said:
I don’t think it was any surprise to learn that the British Prime Minister chose to visit India on her first major overseas trade mission following the European Union Referendum result in the summer. India is one of Britain’s oldest and most reliable trading partners; and it is not just inward investment that matters, India is the third biggest source for investment into United Kingdom Industries, Jaguar Cars being a prime example.
But what I think is really important from the Governmental Statements following the mission is the emphasis that has been placed by both Prime Ministers on opening up access to the London Capital Markets by way of fresh infrastructure funding.
India already has the resolve and the planning to complete major new infrastructure projects over the next five years. Fresh capital sourcing of that kind, especially in rupee denominated bonds, can only give a further impetus to the process.