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The Department of Industrial Policy & Promotion (DIPP) will seek the Finance Ministry’s nod for Russia’s proposal of setting up an ‘Indian Infrastructure Fund’ with equal contribution from both countries. The fund will invest in infrastructure and critical manufacturing areas like defence.
“Since the Russians are insisting that India’s contribution to the fund, which is proposed to have a corpus of $2 billion initially, is to necessarily have government backing, the Finance Ministry’s approval is important,” a government official told BusinessLine .
As per the proposal, while 80 per cent of the funds could be invested in joint projects in India, about 20 per cent could be invested abroad in profitable ventures.
Russia, which is looking to diversify its investment base following the Ukrainian crisis and its stand-off with the West, seems keen to invest in India, especially in the defence sector.
IDFC tie-upWhile the Russian investment agency Russian Direct Investment Fund (RDIF) has already tied up with IDFC, India’s largest non-government-owned infrastructure finance company, for up to $1 billion joint investment in infrastructure and related industries, it now wants the Indian government to back subsequent joint investments.
Russia has proposed that the ‘India Infrastructure Fund’ should be set up on lines of the RDIF which was instituted in 2011 to attract foreign investments in Russia.
While management of the fund is with the Russian government, the advisory board has top executives from global fund managers.
India cautiousBut India wants to take a judicious decision on the matter. “We have to first examine if India wants to commit $1 billion to the fund at the moment. If yes, then India may want to have a greater say in the projects where the fund would invest,” the official said.
If the Finance Ministry wants to go ahead with the proposal, the DIPP will work towards giving it a final shape with Russian officials.
Russian investment in India at the moment is quite low at about $3 billion, while India’s investments in Russia is more than double at $7 billion. Russia and China, on the other hand, have bilateral investments worth $80 billion while bilateral investment between US and Russia is $109 billion.
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