India and the US have agreed in principle to set up a $10-billion debt fund to finance infrastructure projects, commerce minister Anand Sharma said on Monday. "The fund will be a public-private partnership (PPP) and the details will be worked out by India's finance ministry and the US treasury department," Sharma said on the sidelines of a US-India Business Council meeting organised by the Confederation of Indian Industry (CII).
Finance minister Pranab Mukherjee and US treasury secretary Timothy Geithner are directly discussing the modalities required to put in place the debt fund to finance infrastructure projects in India, he added.
The concept of the debt fund was floated by the India-US CEOs Forum comprising 12 corporate honchos from each country. "The governments have yet to take a final view and put in place the modalities. In principle, it has been agreed that the governments will be fully supportive of the recommendation," Sharma said.
The fund would be operated on the PPP mode and it would help meet the country's funding gap in the infrastructure sector, he said. US treasury secretary Timothy Geithner said the fund would act as a catalyst to spur investments in infrastructure.
The India-US CEOs Forum is cochaired by Tata Group chief Ratan Tata and and head of Honeywell Corporation Dave Cote. The Indian chief executive officers (CEO) include ICICI Bank CEO and managing director (MD) Chanda Kochhar, Bharti group chief Sunil Bharti Mittal, HDFC chief Deepak Parekh and State Bank of India chairman O.P. Bhatt.
The US is represented by McGraw Hill Group chief Terry McGraw, Pepsico CEO Indra Nooyi and Citigroup CEO Vikram Pandit, among others. Meanwhile, finance minister Pranab Mukherjee in his address to the Indo-US CEOs forum said the US remains a prime source of investment and an important trading partner for India.
Highlighting that India has emerged as an attractive global investment destination, he said the infrastructure sector alone requires an investment of $514 billion in the 11th Plan (2007-08 to 2011-12).
Almost 30 per cent of the total spending on infrastructure sector during the first three years has come from private sources. "As we go into the next plan period, we expect this proportion to go up to nearly 50 per cent," he added.
For the 12th Five Year plan (2012-13 to 2016-17), the investment in infrastructure is envisaged at $1 trillion and this magnitude of investment would require innovative modes of financing, he said.
The PPP route for investment in Indian infrastructure represents a commercially attractive opportunity for foreign investors as they could invest up to 100 per cent through the automatic route.
The finance minster also said, "We are currently negotiating a bilateral investment treaty with the US and are committed to taking further initiatives that will contribute to creating a more conducive environment for investment flows."
The meeting was also attended by treasury secretary Timothy Geithner, commerce secretary Gary Locke, agriculture secretary Thomas Vilsack from the US side, and commerce and industry minister Anand Sharma and deputy chairman of the Planning Commission Montek Singh Ahluwalia from the Indian side, among others.
Earlier in the day, Geithner met Mukherjee and discussed ways to deepen economic ties and re-balance global growth. The two ministers are understood to have discussed cooperation at the G-20 forum, which would lead economies worldwide to a higher growth terrain.
They discussed technical cooperation on capital markets, infrastructure finance, anti-money laundering and combating the financing of terrorism. India and the US also signed a memorandum of understanding on tapping shale gas resources.