India set to outpace many Asian economies
Canadian pension funds have expressed their interest in allocating funding to the infrastructure in India.
Currently the world’s most populous nation, India has plans to spend $1.5 trillion on infrastructure projects between 2020 and 2025, with Prime Minister Narendra Modi committing to grow the local economy to $5 trillion by 2025.
In a statement, the Indian Finance Ministry said the projects are jointly funded by the state governments, the central government and the private sector.
In July, the Ministry shared on social media during the G20 meeting held in Gandhinagar, India that Canadian Deputy Prime Minister and Minister of Finance Chrystia Freeland informed Indian Finance Minister Nirmala Sitharaman, “Canadian pension funds would be keen to explore investing in Indian infrastructure funds as India offers a stable investment climate.”
Deepak Dara, senior managing director and head of India at Ontario Teachers’ Pension Plan (OTPP), said the pension fund’s first investment in India had been in 2019 to fund the National Investment and Infrastructure Fund (NIIF), which invests in infrastructure in India.
OTPP has allocated more than C$4.5 billion ($3.4 billion) to India, about 50% of which has funded infrastructure. Other investments include funding the projects of renewable energy firm Mahindra Susten, KKR & Co. Inc.’s Highways Infrastructure Trust, and the Sustainable Energy Infrastructure Trust, which is focused on renewables.
“We’ve been disciplined about how we’ve built up our capabilities in India and infrastructure has been a core building block for our investment activities in the country,” said Dara.
In 2014, Canada Pension Plan Investment Board (CPPIB) invested more than C$3.5 billion in India’s infrastructure and sustainable energy.
“The infrastructure and sustainable energies sector in India is a good fit to our strategy of investing patient capital to deliver solid, long-term risk-adjusted returns,” said Kavita Saha, managing director and head of infrastructure and sustainable energies in India at CPPIB.
“We continue to grow our existing portfolio while seeking new partners and investment opportunities.”
The International Monetary Fund estimated India’s GDP to increase by 6.6% in 2023 and by 5.8% in 2024. S&P Global Ratings has forecasted the economy of India to grow at an average of 6.7% over the next three years.
“Many expect India to overtake Japan and Germany over the next few years to become the third-largest economy in the world,” said Bernard Chua, senior client portfolio manager at American Century Investments.
“The investment opportunities should remain plentiful as India invests in its future.”
Peeyush Mittal, portfolio manager at Matthews Asia, shared that India’s government has put in place policies that opened the country to more foreign investments. It has also “announced a production-linked incentive plan that offers cash incentives to multinational companies to establish a manufacturing base in India.”
“The central government’s focus on improving road and rail logistics is aimed at reducing the cost of logistics to manufacture in India,” said Mittal.