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UK, India to launch £500m joint fund

The vehicle will seek to leverage private capital pledged by London-based institutions to back projects coming under India’s $6bn national infrastructure scheme.

The UK and Indian governments have agreed to establish a £500 million ($633 million; €583 million) bilateral sub-fund that will come under the National Investment and Infrastructure Fund, India’s $6 billion sovereign infrastructure vehicle. 

Both governments will make an anchor investment of up to £120 million each in the structure, with the remaining equity to be raised from UK private investors. The fund will aim to finance Indian infrastructure projects qualifying for support by the national vehicle. 

Prime Minister Narendra Modi argued that Indian national programmes including Make in India, Digital India, Skill India and Smart Cities could provide investment opportunities for UK investors.

NIIF targets commercially viable greenfield, brownfield and stalled projects in the country. In July, it identified the rail, grid and road sectors as the likely destination of its debut investments. 

Russia and India agreed last month to set up a similar joint fund, with contributions of $500 million each from the Russian Direct Investment Fund and India’s NIIF, seeking to back Russian businesses operating in India. 

In addition to channeling UK capital into Indian infrastructure through bilateral initiatives, London is also a centre for offshore rupee finance with over $1.1 billion of rupee-denominated bonds issued in the market since this July.  

The National Highways Authority of India and Indian Railway Finance Corporation intend to raise money through such securities in the next few months, the UK government said. It added that other Indian entities, including Energy Efficiency Services and the Indian Renewable Energy Development Agency, have been preparing to issue green bonds including rupee-denominated tranches in London in the coming weeks.