Explained: How Will G-7’s Infrastructure Plan Impact India?

The PGII plan was marketed by the United States as a rival to China’s BRI, with considerably greater consideration for sustainable debt burdens and environmental considerations. Let’s see how the G-7’s infrastructure plan will impact India.

Explained How Will G-7’s Infrastructure Plan Impact India

What does the agritech and climate sustainability fund propose? Will India receive enough money for the construction of its infrastructure?

India was one of five special invitees to the G-7 summit, which took place in Germany’s Schloss Elmau, where the “most industrialized nations” of the world (Canada, France, Germany, Italy, Japan, the U.K., and the U.S., as well as the European Union) initiated the $600 billion Partnership for Global Infrastructure and Investment (PGII), which is led by the United States. According to the initiative’s description, it was a “values-driven, high-impact, and transparent infrastructure partnership to meet the enormous infrastructure needs of low- and middle-income countries and support the U.S. and its allies’ economic and national security interests.” Officials also made it apparent that the PGII would provide competition to China’s Belt and Road Initiative (BRI), which was officially launched five years ago and supports projects all over the world.

What was India’s response?

Vinay Kwatra, the foreign secretary of India, spoke a day after US President Joseph Biden announced the PGII. “I think the [PGII]…is a separate G-7 initiative and to my recollection, unless there is some other input, I think it is not a G-7 outreach initiative,” the representative said, adding, “We will have to see the details of that for us to be able to speak specifically on its elements.”

Why is the response significant?

The first thing to note from Mr. Kwatra’s response is that neither the infrastructure plan nor the documents signed by India, Indonesia, South Africa, Senegal, and Argentina—members of the “G-7 outreach” invitees to the summit—nor were they included in the PGII consultations or disclosed to India. (The EU has participated in the G-7 since 1981 as a “nonenumerated” member.)

The contrast is intriguing because Prime Minister Narendra Modi attended the introduction of the equally sudden “Indo-Pacific Economic Initiative” (IPEF), which is led by the United States, at the Quad Summit in Tokyo just one month prior. India had joined as a “initial” or founding partner country.

The PGII plan was marketed by the United States as a rival to China’s BRI, with considerably greater consideration for sustainable debt burdens and environmental considerations, therefore it was surprising that India had not accepted it. Due to the BRI’s disregard for these arguments and its “violation of territorial integrity,” India has actively resisted it.

Is there any specific role for India?

The PGII would prioritize infrastructure in four crucial areas, including gender equality and equity, digital connectivity, health and health security, and climate and energy security—all of which are priority issues for New Delhi as well. A specific investment strategy for an Agritech and Climate Sustainability Fund is also included in the PGII “factsheet” made public by the White House. This fund would “invest in companies that increase food security and promote both climate resilience and climate adaptation in India, as well as improve the profitability and agricultural productivity of smallholder farms.” The India fund will aim to raise $65 million by September 2022 and $130 million by 2023, according to the filings. The International Development Finance Corporation (DFC) of the US government would raise $30 million in private funding for the fund.

What could be some of the reasons for India’s reticence on PGII?

The Ministry of External Affairs has not yet elaborated on its initial response to the PGII, but it is probable that it will support its approach once it has reviewed and validated it. The fact that the PGII is one of several U.S.-led economic projects announced globally and in the Indo-Pacific with no clarification as to whether they will overlap or run concurrently is one of the causes for some skepticism in New Delhi. Mr. Biden pledged a $50 billion infrastructure fund over five years at the Quad Summit. The PGII’s commitment of $600 billion over five years also comes a year after the United States led a G-7 push to address the estimated $40 trillion “infrastructure gap” in the developing countries and oppose China’s “strategic competition.”

The “Blue Dot Network Initiative,” an initiative of the Trump administration to certify infrastructure projects, was reintroduced by the Biden administration last year, but funding for the projects was not yet provided. Analysts speculate that the Indian response could also be an effort to maintain continuity given India’s past response to the BRI when it was first proposed by Xi Jinping in 2013, years before its official launch in 2017. “When China first unveiled the BRI, India’s initial response was also that this was a plan with geopolitical consequences that India had not been consulted on. India said it would have to study before responding. It is possible that the Modi government’s cautiousness on PGII is about striking a similar balance,” said Sanjaya Baru, author, policy analyst and Distinguished Fellow at the United Services Institution of India (USI).

GreatGameIndia is being actively targeted by powerful forces who do not wish us to survive. Your contribution, however small help us keep afloat. We accept voluntary payment for the content available for free on this website via UPI, PayPal and Bitcoin.

Support GreatGameIndia

Leave a Reply