New Delhi: On December 20, 2024, an important landmark was achieved as the Government of India and the Asian Development Bank (ADB) signed a $500 million loan agreement.
The agreement aimed at supporting green and sustainable infrastructure projects that align with India’s climate commitments.
This ADB loan is backed by a sovereign guarantee and will be provided to the India Infrastructure Finance Company Limited (IIFCL).
By significantly funding key infrastructure projects, this collaboration demonstrates both parties dedication to fostering sustainable environmental growth and addressing climate change challenges.
Mio Oka, Country Director for ADB, highlighted the importance of this financing arrangement by stating, “ADB financing will enable IIFCL to offer long-term funding for infrastructure projects, particularly in areas of connectivity and energy transition, as well as under-supported sectors such as urban development, education, and healthcare.”
This statement highlights the programme’s wide-ranging goals, focusing on infrastructure and social improvements.
Financing Needs for Net-Zero Commitments
India needs massive private capital investments to achieve the goal of net-zero commitments. India’s ambitious goal to meet its net-zero commitments necessitates massive private capital investments.
India needs innovative financing and risk management tools to overcome the sector’s inherent risks and market imbalances to meet these goals.
The India Infrastructure Finance Company Limited (IIFCL), as a strategic development finance institution, is positioned to meet these financing needs at this juncture.
Its role in mobilising required fund/capital and ensuring that infrastructure projects adhere to climate sustainability standards is crucial.
For many years, the ADB has worked hand-in-hand with IIFCL to build its operational and risk management capacity. IIFCL’s operations, particularly its use of private sector resources, have significantly improved through this ongoing collaboration.
To attract institutional investors and ensure sustainable funding, IIFCL must expand its product offerings and this evolution is essential.
Using Private Sector Resources
The central aim of the project is to leverage private sector resources. IIFL operations are increasingly towards mobilising private sector investments in Infrastructure projects.
It develops innovative financial product and instruments to attract private (including institutional) investors to invest.
India’s infrastructure projects need massive capital investment, and using private sector resources is the key to achieving this and ensuring long-term sustainability.
The project aims to strengthen IIFCL’s capacity to incorporate environmentally friendly and best practices in its infrastructure projects. India is working collaboratively to make significant progress towards a greener and more sustainable future.
(The author of this article is Madhusudhanan S, an Economist and former consultant with the Government of India in New Delhi. He has 16 years’ experience in Economics Policy and was associated with CMIE, Government of Tamil Nadu, Union Planning Commission, and Union Ministry of Finance).
