UK INDIA INFRASTRUCTURE FINANCING BRIDGE from Vajirao & Reddy Institute

UK INDIA INFRASTRUCTURE FINANCING BRIDGE

• On September 8, 2025, the UK–India Infrastructure Financing Bridge (UKIIFB) marked its first anniversary by releasing a report in London.
• Despite initial momentum, no projects are currently in the pipeline.
• The UKIIFB now focuses on policy recommendations aimed at de-risking investments in Indian infrastructure.
• The initiative is jointly led by NITI Aayog (India) and the City of London Corporation (UK).

• Launched in September 2024 by the Governments of India and the UK.
• Objective: Facilitate UK investments into Indian infrastructure sectors.
• Aimed at mobilizing part of the $2 trillion investment needed in Indian infrastructure by 2030.
• Acts as a public-private platform to overcome structural and regulatory barriers.

• No active projects remain from initial shortlist.
• Focus shifted to eight key policy recommendations.
• Emphasis on making Indian infrastructure more investible for international investors.

• Align Indian procurement process with international models like the UK’s Five Case Model.
• Improve alignment with global ESG (Environmental, Social, Governance) standards.
• Address operational risks and perception of unpredictability in project execution.
• Broaden the market by supporting mid-sized infrastructure firms, currently underrepresented.
• Reform tax policies:
  • Reduce withholding taxes on foreign exchange lending.
  • Treat foreign funds more equitably with domestic funds.
• Enhance revenue protection mechanisms for investors.
• Simplify repatriation of capital for foreign investors.
• Create clearer investment frameworks to boost investor confidence.

• India's infrastructure sector is dominated by large players.
• Very few mid-sized firms (only ~60,000 firms with 100–200 employees).
• Creates an hourglass structure instead of a healthy pyramid, limiting competition and innovation.

• Although India is reforming, many regulatory bottlenecks remain.
• Investors perceive the environment as opaque and unpredictable.

• Concerns about foreign exchange regulations, and the ease of returning profits to home countries.

• Withholding taxes on offshore lending make certain funding routes less attractive.
• Offshore subsidiaries of UK banks face disincentives under current tax rules.

• Recognised the structural issue of a weak middle in India’s corporate structure.
• Emphasised India’s young workforce and growth momentum.
• Suggested that bilateral investment treaties (BITs) are helpful but not essential:
  • Capital can still flow through countries like Singapore and South Korea which already have treaties with India.

• Described the report as a "compelling case for change."
• Praised India’s reforms but noted that further work is needed.

• Leverages UK’s financial expertise to bridge India’s infrastructure funding gap.
• Supports Make in India, Smart Cities, Gati Shakti, and National Infrastructure Pipeline.
• Focus on renewable energy aligns with India’s climate commitments (Net Zero by 2070).

• Positions London as a global financial hub for infrastructure investment in emerging markets.
• Strengthens post-Brexit economic ties with India, a major Commonwealth partner.

• Strengthens the India–UK Comprehensive Strategic Partnership.
• Complements ongoing FTA (Free Trade Agreement) negotiations and potential Bilateral Investment Treaty (BIT).
• Reinforces shared commitment to:
  • Climate finance
  • Sustainable development
  • Open, rules-based investment environments

• Implement policy recommendations from the UKIIFB report.
• Accelerate reforms in procurement, tax treatment, and investor protection.
• Develop the mid-tier business ecosystem to support innovation and execution.
• Leverage India’s demographic dividend for green infrastructure expansion.
• Ensure that future projects under UKIIFB are clearly defined and executed.