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India Noncommittal on the Partnership for Global Infrastructure and Investment

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India Noncommittal on the Partnership for Global Infrastructure and Investment

India’s tepid response to the PGII seems odd given Delhi’s opposition to the BRI, which the new G-7 initiative seeks to counter.

India Noncommittal on the Partnership for Global Infrastructure and Investment

Flags of G7 countries, outreach partners, and international organizations wave in the breeze, Monday, June 27, 2022, at Schloss Elmau in Krün, Germany.

Credit: Official White House Photo by Carlos Fyfe

The G-7 countries that met a month ago for the Leaders’ Summit in Germany formally launched the Partnership for Global Infrastructure and Investment (PGII). The PGII is an infrastructure initiative to fund connectivity projects in developing countries and is seen as a counter to China’s Belt and Road Initiative (BRI). U.S. President Joe Biden in a tweet said, “Collectively, we aim to mobilize nearly $600 billion from the G7 by 2027 to invest in critical infrastructure that improves lives and delivers real gains for all of our people.” Biden added that the focus of the PGII will be on four key areas: health and health security, digital connectivity, gender equality and equity, and climate and energy security. 

India, which was present at the G-7 meeting, had a rather tepid response to the new initiative. Indian Foreign Secretary Vinay Kwatra said that India would respond once it has examined the details of the initiative. Speaking to the media on questions related to the G-7 infrastructure initiatives, the foreign secretary also stated that Prime Minister Narendra Modi’s “observations in both plenaries focused on this part, which is the sustainable solution and the Lifestyle for Environment.” He clarified that the PGII is a “separate G7 initiative” and “not the G7 Outreach initiative.”

India’s position is puzzling because given its economic circumstances, the best option for India is to join other like-minded partners in offering alternatives to developing countries that need infrastructure and connectivity.

India has opposed the Chinese BRI, as have many Western countries, on account of issues such as lack of transparency and fair processes as well as the economic non-viability of several of the BRI projects, which critics say have led states into a “dept trap” situation. India has called on many countries to be wary of pursuing such projects. But without offering a viable alternative, these countries are unlikely to pass on China’s offers. The PGII posits itself as a collective alternative, but India’s apprehension seems to be because the PGII is, at this stage, only a G-7 initiative (India is not in the G-7 but participates regularly as an observer). Nevertheless, India could be supportive of the venture in an effort to minimize the role of China’s BRI in infrastructure development and connectivity efforts around the world. 

Even as India has remained somewhat noncommittal towards the PGII, according to the White House Factsheet, there are investments aimed at India. The U.S. International Development Finance Corporation (DFC) will be investing up to $30 million in Omnivore Agritech and Climate Sustainability Fund 3, a venture capital fund that makes investments in the areas of agriculture, climate, and food security. According to the Factsheet, the Fund plans to make investments in companies that improve food security as well as further climate resilience and climate adaptation in India, while strengthening the profit generation and agricultural productivity of smallholder farms. This is in fact the second time that the DFC is making an investment proposal in India. DFC had in 2021 funded the U.S.-based solar manufacturing company, First Solar, with $500 million in debt financing to assist in its photovoltaic solar module manufacturing facility in Tamil Nadu, in southern India. This facility, capable of an annual capacity of 3.3 GW, will be operational by 2023.

The PGII is not a brand-new initiative but a reworked version of Build Back Better World (B3W), launched by the White House in June 2021. B3W was conceived as an initiative to cater to the enormous infrastructure requirements among low- and middle-income countries. B3W fizzled out, but given the demand for quality infrastructure the PGII, according to a White House Memorandum on the new initiative, has been launched with the goal of being open, transparent, and accountable with performance metrics linked to follow up on investments and timelines, while ensuring high standards. The PGII plans to muster funds from the private sector in both the United States and partner countries as well as work with international financial institutions in building up the necessary resources. In addition, the PGII seeks to involve and “align G7 and other like-minded partners to coordinate our respective approaches, investment criteria, expertise, and resources on infrastructure to advance a common vision and better meet the needs of low- and middle-income countries and regions.” This opens up opportunities for countries like India to get involved in the PGII. 

India could offer its expertise in some of the principal areas of focus for the PGII. As mentioned earlier, the key areas include climate and energy security, digital connectivity, health and health security, and gender equality and equity. Digital connectivity could be one such area where India can make meaningful contributions in transporting its expertise and experience. While India has been in the process of digitizing many government services, the COVID-19 pandemic pushed digitalization of many sectors including the electronic payment sector. Digitalization has become a centerpiece in ensuring economic wellbeing and competitiveness. India’s innovations in the fintech sector — including through measures like Unified Payments Interface (UPI), a real-time mobile payments system developed by India indigenously; and India Stack, bringing together NPCI’s digital payment projects for digital payments and Aadhaar’s identity and authentication prowess via APIs — can be replicated in a number of developing countries. Thus, there are ways and means for India to be part of the PGII and offer opportunities and solutions to a large number of countries in the developing world. India as a developing country, developing such solutions, can be a story of inspiration to many.

China’s response to the PGII was as expected. The Chinese Ministry of Foreign Affairs called the Western narrative of the Chinese BRI “false” and said that connectivity projects should not be “to advance geopolitical calculation.” Instead, the ministry said, “the world wants to see real investment and projects that will truly deliver for the people.”

India along with groupings such as the G-7 can effectively counter China through initiatives like the PGII. But there is a drawback: The PGII and such initiatives involve a number of countries as well as private sector participation from the participant countries, which means bringing out a coherent, coordinated approach to make it work is going to be that much more challenging than China’s BRI.