UK INDIA INFRASTRUCTURE FINANCING BRIDGE
Why in News?
- On September 8, 2025, the UK–India Infrastructure Financing Bridge (UKIIFB) marked its first anniversary by releasing a report in London.
- Despite initial momentum, no projects are currently in the pipeline.
- The UKIIFB now focuses on policy recommendations aimed at de-risking investments in Indian infrastructure.
- The initiative is jointly led by NITI Aayog (India) and the City of London Corporation (UK).
WHAT IS UKIIB?
- Launched in September 2024 by the Governments of India and the UK.
- Objective: Facilitate UK investments into Indian infrastructure sectors.
- Aimed at mobilizing part of the $2 trillion investment needed in Indian infrastructure by 2030.
- Acts as a public-private platform to overcome structural and regulatory barriers.
HIGHLIGHTS FROM THE 2025 REPORT
- No active projects remain from initial shortlist.
- Focus shifted to eight key policy recommendations.
- Emphasis on making Indian infrastructure more investible for international investors.
KEY POLICY RECOMMENDATIONS
- Align Indian procurement process with international models like the UK’s Five Case Model.
- Improve alignment with global ESG (Environmental, Social, Governance) standards.
- Address operational risks and perception of unpredictability in project execution.
- Broaden the market by supporting mid-sized infrastructure firms, currently underrepresented.
- Reform tax policies:
- Reduce withholding taxes on foreign exchange lending.
- Treat foreign funds more equitably with domestic funds.
- Enhance revenue protection mechanisms for investors.
- Simplify repatriation of capital for foreign investors.
- Create clearer investment frameworks to boost investor confidence.
CHALLENGES IDENTIFIED
1. Lack of Mid-sized Firms
- India’s infrastructure sector is dominated by large players.
- Very few mid-sized firms (only ~60,000 firms with 100–200 employees).
- Creates an hourglass structure instead of a healthy pyramid, limiting competition and innovation.
2. Regulatory Complexity
- Although India is reforming, many regulatory bottlenecks remain.
- Investors perceive the environment as opaque and unpredictable.
3. Revenue and Capital Repatriation
- Concerns about foreign exchange regulations, and the ease of returning profits to home countries.
4. Taxation Issues
- Withholding taxes on offshore lending make certain funding routes less attractive.
- Offshore subsidiaries of UK banks face disincentives under current tax rules.
STATEMENTS OF KEY STAKEHOLDERS
B.V.R. Subrahmanyam (CEO, NITI Aayog):
- Recognised the structural issue of a weak middle in India’s corporate structure.
- Emphasised India’s young workforce and growth momentum.
- Suggested that bilateral investment treaties (BITs) are helpful but not essential:
- Capital can still flow through countries like Singapore and South Korea which already have treaties with India.
Chris Hayward (City of London Corporation):
- Described the report as a “compelling case for change.”
- Praised India’s reforms but noted that further work is needed.
STRATEGIC IMPORTANCE
For India:
- Leverages UK’s financial expertise to bridge India’s infrastructure funding gap.
- Supports Make in India, Smart Cities, Gati Shakti, and National Infrastructure Pipeline.
- Focus on renewable energy aligns with India’s climate commitments (Net Zero by 2070).
For the UK:
- Positions London as a global financial hub for infrastructure investment in emerging markets.
- Strengthens post-Brexit economic ties with India, a major Commonwealth partner.
IMPLICATIONS FOR UK INDIA RELATIONS
- Strengthens the India–UK Comprehensive Strategic Partnership.
- Complements ongoing FTA (Free Trade Agreement) negotiations and potential Bilateral Investment Treaty (BIT).
- Reinforces shared commitment to:
- Climate finance
- Sustainable development
- Open, rules-based investment environments
WAY FORWARD
- Implement policy recommendations from the UKIIFB report.
- Accelerate reforms in procurement, tax treatment, and investor protection.
- Develop the mid-tier business ecosystem to support innovation and execution.
- Leverage India’s demographic dividend for green infrastructure expansion.
- Ensure that future projects under UKIIFB are clearly defined and executed.
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