Although a late starter, India is fast catching up with China in extending credit world over to build infrastructure and push economic ventures. The Modi government has extended $24.2 billion line of credit ($10 billion between 2003 and 2014) to partner countries.
Fifty-two lines of credit have been issued since 2014 and more are in the offing, when Jordanian king and Belarusian President visit India later this year.
While correcting malpractices that had crept into India’s African endeavours, New Delhi had completed 20 major ventures in the past two years, official sources told ET.
The focus under line of credit, extended through MEA’s Development Partnership Administration wing, was now on key infrastructure projects and not just capacity building, sources said, referring to two such endeavours in Africa — presidential office in Ghana (symbol of Indo-Ghana friendship) and National Assembly building complex in Gambia.
Such iconic symbols of bilateral partnership have been hallmark of Chinese presence across continents. “Such projects have political significance and contribute to overall strengthening of bilateral partnership between two countries,” said an expert who has closely followed Chinese infrastructure projects across Asia and Africa.
While China dictates type, terms and conditions of projects for which it extends grants, Indian approach is consultative in nature keeping local sentiments in mind.
A non-traditional area where India has extended the line of credit during the past three years is the defence sector — Vietnam ($500 m), Bangladesh ($500 m), Sri Lanka ($100 m) and Mauritius. India has received requests for supply of defence equipment from friendly countries in SE Asia, Africa and Latin America too. Such lines of credit extended by India are expected to grow in the coming years, according to an expert who has followed India’s defence partnerships across regions.
During past one year alone, 13 projects aggregating $925.94 m across 10 countries have been completed. “Development Partnership is a key instrument in India’s foreign policy. Line of credit on concessional terms is an important component of India’s development cooperation policy in Africa, Asia and Latin America. The surge since May 2014 reflects political commitment towards such partnership,” pointed out one of the sources quoted above.
Unlike India, Chinese loans are offered at commercial rates and this has pushed certain countries in Asia and Africa into debt trap. The oversight mechanism put in place to check misuse of such funds include accompaniment of project proposal with detailed report by companies willing to undertake projects, pre-qualification exercise to identify experienced and competent companies for implementing projects, closer scrutiny and bid evaluation by the lending bank, said persons familiar with the process.
To ensure effective implementation, India’s EXIM Bank has undertaken empanelment of consulting firms and EPC contractors. It has completed empanelment of 82 consulting firms in various sectors. A total of 117 firms have been empanelled as EPC Contractors.