The National Infrastructure and Investment Fund (NIIF) is looking to launch a USD 2-billion long-term fund to finance various mega projects. The new fund has already been registered.
The NIIF already has two operational funds—the NIIF master fund that invests directly into companies and a fund of funds that invests in funds that are managed by third parties.
“There is a third fund which we are designing. The size of the fund will be USD 2 billion,” NIIF managing director and chief executive Sujoy Bose said at a function.
“The new fund will focus on major infrastructure projects and look for partners who are willing to take long-term risks with us,” he said, adding, capital raising for the new fund will begin soon.
On the return from the proposed fund, Bose said, “we believe that with the kind of fast growth that the economy is clipping at, there will be plenty of return over time.”
The Asian Infrastructure Investment Bank will be the anchor investor for the fund of funds, he said.
On Sunday, finance minister Piyush Goyal had said the AIIB board had approved a USD 200-million capital infusion into the fund of funds of the NIIB. In the first tranche, the multilateral bank will pump in USD 100 million and the remaining sometime later.
This proposed fund infusion can be leveraged 10-12 time, taking the overall fund play to the tune of USD2.4 billion, the minister had said.
Bose said the country needs about USD 200 billion investment into the infrastructure sector annually but currently the inflow is only USD 110 billion.
“There is a gap of USD 90 billion between what is coming in and what is needed,” he said, adding private sector investments into the infra sector of a fast-growing economy should be 8-9 per cent, but here it is only half of that.
The government has increased its infra spending from about USD 26 billion in 2014 to USD 90 billion in FY19.
Speaking on the same event, British chancellor of the Exchequer Philip Hammond said the Indo-British trade grew 15 per cent last year and Britain continues to be one of largest investors in the country.
Citing infrastructure as one of the areas where there is scope for more collaboration between both the countries, Hammond said, “India will require USD 4.5 trillion investments into the infra sector by 2040. But there is an estimated gap of USD 526 billion. Government funding alone would not be sufficient to meet this need.”
“Mobilising private capital will be critical to fill this gap. As the world’s leading financial centre, Britain is able to support India in this,” Hammond said.