Both countries aim to create jobs and modernize infrastructure once the lockdowns and pandemic ends.
Two of the British Commonwealth’s biggest economies, India and the UK, have announced plans for the creation of infrastructure banks to finance domestic projects post-pandemic and post-Brexit.
India approved formation of the state-owned National Bank for Financing Infrastructure and Development to finance large, long-term, nationwide projects. New Delhi plans to leverage $3 billion in seed capital for the new bank into $41 billion over the next four years, by tapping into overseas and national debt markets.
Similarly, the new UK infrastructure bank seeks to make up for the post-Brexit shortfall in low-cost finance capital that had previously come from the European Investment Bank. The bank will be based in the English city of Leeds and have an initial capitalization of £12 billion ($16.5 billion), plus the ability to issue £10 billion of guarantees. Its aim is to support at least £40 billion of investment in big infrastructure projects by offering finance to local councils. Local politicians believe it could spur new industries, including green technology projects, across Yorkshire and North Lincolnshire, regions of northern England that have been chronically depressed since the Thatcher years.
A soft launch is expected this spring, before ratcheting up activities in the coming months, according to a government paper published last month.
India’s new bank will use a combination of debt and equity funding to modernize the vast nation’s dilapidated infrastructure, much of which dates back to the colonial period. The government aims to invite both foreign and domestic funds to take equity stakes in the bank while New Delhi gradually lowers its position to 26%. To facilitate the initiative, the government has amended its Stamp Act to permit investments from big pension and sovereign wealth funds, as well as insurance firms.
Indian industrialists have long sought the creation of a national development bank. The global pandemic suddenly made the project urgent.