Country or Region: India
Sector: Innovative Financing for Development
Client: European Commission
Date: January 2019 – June 2020
VJW international is pleased to announce the completion of the ‘Studies to identify areas for EU-India Development Cooperation’. The team of Expert successfully reviewed the potential for the EU’s contribution to mobilise private finance from domestic and foreign sources, through its blending and investment facilities.
The study successfully addressed in detail the following:
1. Where the EU should concentrate its use of its investment/blending facilities to respond to nationally identified (central and state) development needs in India.
The main areas identified by the government address challenges such as the environment and climate change, waste management, renewable energy, social inclusion, food and agriculture, rapid urbanisation, and transportation. According to this review, the EU could concentrate its support on private sector initiatives and financial resources in sectors or geographical areas where there is a considerable financing gap, and/or where innovative social business models are still at an early stage. At a sectoral level, these include education and health, agriculture and rural communities, waste and the circular economy, and urban transportation.
2. Type of investment modalities which fit with the EU facilities.
The study found that to support sustainable development in India, the EU could continue to combine two fundamental objectives it has previously followed in choosing financial tools: innovation and leverage. The main EU facility operating in India, the Asian Investment Facility, has so far mostly provided support in the form of technical assistance or investment grants. However, this blending facility can also intervene with risk-sharing instruments, such as equity or guarantees. The ElectriFi thematic facility has already provided risk capital in one of its two Indian operations.
3. Potential partners that have a record of successful delivery (e.g. the private sector, including financial institutions).
The investment facilities have already shown that EU financing can have a catalysing effect on other funding sources. The EU Commission estimates that, having invested €149 mn in 39 projects in Asia since its inception in 2010, the AIF has mobilised €3.1 bn from European finance institutions, creating a total investment of nearly €5.6 bn. Considering size of the financing needs for achieving the Sustainable Development Goals in India—the annual gap to 2030 exceeds USD 550 bn—and the increased interest from Indian and foreign investors in responsible or impact investing, the EU blending facilities can play a significant role, together with other development financial institutions, in leveraging these resources.