Indias Infra boost: Govt to invest Rs 30bn in NIIF for Economic Growth | Explained

New Delhi: Ever since the Modi government came to power in 2014, the administration has focused on improving and creating the infrastructure. The government capex was more than Rs 11 lakh crore in the 2025-26 budget. According to a Mint report, the central government is planning to invest an equity of Rs 30,000 million in India's sovereign wealth fund. This investment is a sign of the government's continued focus on infra, which has accelerated economic growth. According to the sources (refused to be identified), a note has been sent to the Expenditure Finance Committee (EFC) regarding capital infusion into the National Investment and Infra Fund (NIIF).

Mint quoted sources saying that Expenditure Secretary V said that once the scheme is approved by the EFC headed by Vuallanum, the cabinet note will be sent for approval and it is likely to be announced in the forthcoming Union Budget. One of the above sources said, a significant portion of the huge amount being raised for NIIF will be invested in NIIF Master Fund II and accordingly the process has started.

NIIF is in the process of raising around $3.5 billion for its second master fund. Spending on infrastructure has become the mainstay of India's economic growth, where government investment has accelerated GDP despite the slowness of private investment in the last few years. NIIF is also launching its Private Markets Fund II, targeted at $1 billion, and is in talks with the US for a proposed bilateral fund. So far, neither the NIIF and the Finance Ministry have issued any statement in this matter.

The Indian government owns 49 percent stake in NIIF. It mainly focuses on investment in key areas of infrastructure. This sovereign fund manages equity capital of $4.9 billion through its four funds — Master Fund, Private Markets Fund, Strategic Opportunities Fund and India-Japan Fund — which includes investments in sectors such as ports and logistics, renewable energy, roads, digital infra and manufacturing. NIIF was established in 2015 with an initial investment of 20,000 million rupees from the central government.

In 2020, the Union Cabinet sanctioned another Rs 6,000 crore as equity investment in the NIIF debt platform, which includes Asim Infrastructure Finance Limited (AIFL) and NIIF Infrastructure Finance Limited (NIIF-IFL). NIIF's investors include Abu Dhabi Investment Authority (ADIA), Temasek, AustralianSuper, Ontario Teachers' Pension Plan, Canada Pension Plan Investment Board (CPPIB), Asian Infrastructure Investment Bank (AIIB), Asian Development Bank (ADB), New Development Bank (NDB) and Japan Bank for International Cooperation (JEB). BIC) included.

NIIF is expected to play an important role in India's infra growth target. The government's National Infra Pipeline (NIP) set a target of an estimated infra investment of about Rs 111 lakh crore from FY 2020 to FY 2025. India's capex target for the financial year 2026 has been set at Rs 11.21 lakh crore, which is about 3.1 percent of Gross Domestic Product (GDP). In last year's budget, this target was $11.11 trillion, which was about 3.4 percent of GDP. According to the government, the effective capacity for fiscal year 2026 is estimated to be $15.48 trillion, compared to $13.18 trillion in the previous financial year.

Since the financial year 2020, the capex has tripled, which has increased productivity in all sectors. Since Sanjeev Agarwal, who was earlier overseeing global private equity firm Actis' energy investments in Asia, took over as Chief Executive Officer (CEO) and Managing Director (MD) of NIIF in January last year, NIIF has achieved some spectacular successes. Among these, ONGC NTPC Green Private Limited (ONGPL) of Ayana Renewable Power Private Limited (ONGPL) has an enterprise value of $2.3 billion.