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How The New Investment Incentive Agreement With The USA Will Aid India

IIA is a legal requirement for the US in order to continue its operations and financial support in India under DFC programs

How The New Investment Incentive Agreement With The USA Will Aid India
PTI photo

Ahead of the crucial Quad summit in Tokyo on Monday, India and the US inked a pact on Investment Incentive Agreement (IIA), in order to enhance the US investment in India across all sectors. The investment incentive agreement was signed between foreign secretary Vinay Kwatra and the CEO of the US International Development Finance Corporation (DFC). IIA is a legal requirement for the US in order to continue its operations and financial support in India under DFC programs. 

What Is Investment Incentive Agreement

The IIA supersedes a similar agreement that was formed between the United States and India in 1997. According to the foreign ministry, “The IIA was signed to keep pace with the additional investment support programs offered by the DFC, such as debt, equity investment, investment guarantee, investment insurance or reinsurance, feasibility studies for potential projects and grants.”

“It is expected that signing of IIA would lead to enhanced investment support provided by DFC in India, which shall further help in India’s development,” the ministry added. 

DFC Programs

Through the agreement, the DFC has proposed an investment of $4 billion to provide financial assistance for pharmaceutical, healthcare, renewable energy, small and medium enterprises, and infrastructure sectors in India. 

DFC is a successor of Overseas Private Corporation (OPIC) which began operations in India in 1974, and has so far invested $5.8 billion in India of which $2.9 billion is outstanding. The OPIC was reformed into DFC after the enactment of the Better Utilization of Investments Leading to Development (BUILD) Act of 2018. The BUILD Act, which is part of the US foreign policy, aims to facilitate the involvement of the private sector in the economic development of lower-income or middle-income countries. 

Under the DFC programs, the US provides fiscal support to emerging economies for healthcare, renewable energy, clean energy, infrastructure, and technology in lower-income and middle-income countries, as part of its foreign policy. 

Notably, last year, DFC in association with US Agency for International Development (USAID) sponsored a credit guarantee scheme in which loans worth $55 million were disbursed in order to support farmer producer organizations, ag-tech companies, and companies engaged in clean energy solutions amidst the Covid-19 pandemic. The eight-year program which was called, “India Covid Response Program for Agriculture Transition” and is aimed to support almost two lakh, small Indian farmers.

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