Why in news?
The government has secured an investment commitment of up to $1 billion from Abu Dhabi Investment Authority (ADIA), which will become the first institutional investor in the NIIF Master Fund
NIIF was registered with the Securities and Exchange Board of India as a Category II Alternate Investment Fund on December 28, 2015.
The fund has been set up as a fund of funds structure with an aim to generate risk-adjusted returns for its investors alongside promoting infrastructure development.
The Fund will invest across infrastructure projects in the economy including in power, green energy and road sectors.
It has a targeted corpus of Rs 40,000 crore to be raised over the years, 49 per cent of which will be funded by the government at any given point of time.
The remaining 51 per cent of the corpus is to be raised from domestic and global investors, including international pension funds, sovereign wealth funds, multilateral/bilateral investors.
A Governing Council chaired by Finance Minister already been set up to act as an advisory council to the NIIF.
In the last financial year, the NIIF received a total of Rs 15 crore from budgetary resources for meeting administrative expenses.
For the current financial year, the government has allocated Rs 1,000 crore as per Budget Estimates to NIIF.
The government expects NIIF to raise Rs 8,000 crore from various sources to fund projects worth Rs 16,000 crore in the current financial year.
The NIIF is set to play an important role in facilitating the flow of foreign capital into India’s infrastructure sector.
GREEN GROWTH EQUITY FUND
India and the United Kingdom have decided to set up a 240 million pound Green Growth Equity Fund to finance clean energy projects in India. Decision inin this regard was taken at the 9th India-UK Economic and Financial Dialogue in Delhi. Both India and UK are going to make a contribution of 120 million pounds each in the fund which will focus initial investments in India’s rapidly growing energy and renewables market. The Fund will be asub-fund of National Infrastructure and Investment Fund (NIIF) which was set up by India in 2015 to finance greenfield as well as brownfield projects .
ANALYSIS (For mains)
Abu Dhabi’s fund
In a major boost to the National Investment and Infrastructure Fund (NIIF), the government has secured an investment commitment of up to $1 billion from Abu Dhabi Investment Authority (ADIA), which will become the first institutional investor in the NIIF Master Fund and a shareholder in the Fund’s investment management company that is, the National Investment and Infrastructure Limited.
ADIA is expected to hold around 10-11 per cent stake in the NIIF Master Fund.
This is a significant milestone in operationalisation of NIIF.
This Agreement paves the way for creating significant economic impact through investment in commercially viable infrastructure development projects.
ADIA is expected to bring in $200-250 million in the first fund and will invest the remaining portion in investment vehicles created by the NIIF.
The government is not providing any guarantee on returns and the investments will be done purely on commercial basis.
Domestic Institutional Investor of NIIF
Apart from ADIA, six domestic institutional investors will also join the NIIF Master Fund:
HDFC Standard Life Insurance Company Ltd, HDFC Asset Management Company Ltd, Housing Development Finance Corporation Ltd, ICICI Bank Ltd, Kotak Mahindra Old Mutual Life Insurance Ltd and Axis Bank Ltd.
Investment by other countries under NIIF
Recently India and the UK announced the launch of a Green Growth Equity Fund to leverage private sector investment in green infrastructure projects in India.
They agreed to anchor investments up to £120 million each (total £ 240 million) in the joint fund, which will be established under the NIIF framework.
The NIIF has also signed memoranda of understanding with the government of UAE, Russia’s RUSNANO and RDIF; the Qatar Investment Authority and the Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development to explore investments in the Fund.
QUESTION BASED ON THE TOPIC
Investment by foreign governments on India’s infrastructure are seen often in recent news .Explain how can it tap our economic development better than domestic investment.Analyse whether foreign investment in Infrastructure projects a boon or bane
Source – Indian Express (18/10/2017)