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AIIB to invest US$200 million in Indian infrastructure fund
The Asian Infrastructure Investment Bank is planning to invest US$200 million in India's National Investment and Infrastructure Fund
Michael Marray 7 Mar 2018

THE Asian Infrastructure Investment Bank (AIIB) is planning to invest around US$200 million in India's National Investment and Infrastructure Fund (NIIF). The move was announced by AIIB President Jin Liqun during a visit to Mumbai.

Although India is a vocal critic of China's Belt & Road ambitions, it nonetheless cooperates with China as a fellow member of BRICS (Brazil, Russia, India, China and South Africa), and is also a strong supporter of China-led development bank AIIB.

AIIB President Jin Liqun likes to stress that his institution should not be viewed as the Belt & Road bank, but a multilateral development bank along the lines of the Asian Development Bank. He also notes that the ADB and AIIB cooperate on projects. The AIIB currently has 84 members, and India was an early signatory back in January 2016.

While he was in India, Jin met with Prime Minister Narendra Modi to talk about potential AIIB involvement in future projects. Mumbai will host the third Annual General Meeting of the AIIB on June 25 and 26.

Given its vast requirements for new infrastructure, new sources of finance are needed alongside the government budget and loans from state-owned banks. The NIIF will seek out investments in commercially viable infrastructure development projects.

The National Investment and Infrastructure Fund launched its NIIF Master Fund in October 2017, including a US$1 billion investment from the Abu Dhabi Investment Authority. Six Indian banks and insurance companies also signed up as investors. The Indian government retains a 49% stake.

In January, NIIF announced a deal with Dubai-based ports operator DP World to create a fund to invest up to US$3 billion of equity in India’s transport and logistics sectors. This could include sea and river ports, freight corridors, special economic zones, inland container terminals, and logistics infrastructure such as cold storage.

NIIF has a flexible fund of funds structure, and for example last year the UK and India agreed plans to set up a 240-million-pound (US$332.6 million) Green Growth Equity Fund under the NIIF umbrella.

The AIIB has already signed off on US$1 billion worth of support for five infrastructure projects in India. These include the Bangalore Metro Rail Project, a Transmission System Strengthening Project, and rural roads in Gujurat.

But in spite of the good working relationship between India and the AIIB, the underlying tensions remain at a high level between the two countries. The recent news that China plans to abolish Presidential terms limits – opening up the possibility of a long run of power for Xi Jinping – did not go down well in India.

In addition to the possibility of some future military conflict, India views China's growing influence with its neighbours via Belt & Road infrastructure projects with unease. It is especially unhappy with elements of the China Pakistan Economic Corridor (CPEC) that involve what it calls Pakistan Occupied Kashmir. As Xi Jinping's signature project, many analysts expect to see the Belt & Road being expanded in scope as Xi consolidates his power.

A Mumbai-based media outlet ran a highly critical article about the abolition of presidential term limits, and said that Xi may end up ruling for life, along the lines of Mao Zedong.

Photo: AIIB

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