New US development finance rules may lead to more funds for India

The latest change will combine the OPIC and the US Agency for International Development's Development Credit Authority, allowing development finance capabilities go up to $60 bn

India may be a major receiver of development finance soon as updated laws for the sector allowing greater funds were unveiled by the US last week, David Bohigian, executive vice-president of the OPIC (Overseas Private Investment Corporation) said on Tuesday. 

The US Senate passed the BUILD Act (Better Utilization of Investment Leading to Development) earlier this month, that is set to create a new US government agency — the US International Development Finance Corporation. 

The latest change will combine the OPIC and the US Agency for International Development's Development Credit Authority, allowing development finance capabilities go up to $60 billion, Bohigian said. This will help American businesses invest in emerging markets. It will also mean that OPIC may increase its exposure to India beyond the current $1.5 billion across 40 ongoing projects in every sector -- from small- and medium-size ventures up to major infrastructure projects. The new entity will also have equity authority.

Most of these projects are in the renewable energy space, apart from environmental and drinking water sanitation. However, the beneficiaries are spread across diverse businesses, from camel tours, souvenir shops and recycling plants to bicycle repair units, Bohegian added. 

"Active for decades, we have been part of $4 billion worth of projects in the country. Now, we will be able to invest in equity," he said. However, he clarified that OPIC does not take over stressed assets and will not be eyeing those being put up by the government as part of disinvestment. 

The biggest change in 15 years in the development finance setup of the US, the move was spurred by US President Donald Trump saying multiple times that nations that do not agree with the US foreign policy will not receive aids. One of the principles on which OPIC funds are disbursed is maintaining sovereign rights to jobs for local workers. 

OPIC currently manages a portfolio of $23 billion across 90 countries. Bohigian will be meeting Finance Minister Arun Jaitley, apart from officials in the External Affairs Ministry.