A very good morning and a warm welcome to the Opening Ceremony of the Third Annual Meeting of the Asian Infrastructure Investment Bank (AIIB)! It is my proud privilege to welcome Hon’ble Prime Minister Shri Narendra Modi ji to this momentous occasion signifying global cooperation and development. A special welcome to all the distinguished participants from across the world. It is my privilege, as the Governor of AIIB for India, to address this august gathering of international leaders and dignitaries representing governments, developmental agencies, banks, academia and business.

India is honoured to host this year’s Annual Meeting of AIIB. India has a symbiotic relationship with this institution as one of its 21 founding member countries, the second largest shareholder and the largest recipient of assistance sanctioned so far.

India is blessed to be guided by the principles of Mahatma Gandhi, the father of the nation, who dedicated his life to the cause of serving the poorest of the poor. He once remarked & I quote “In a gentle way you can shake the world.” AIIB is gently shaking the world with its focus on helping member countries improve the life of their citizens by combating poverty and climate change. We will be celebrating the 150th birth anniversary of Mahatma Gandhi shortly and this meeting in many ways reflects his vision.

The solution to all our problems lies in development. AIIB will help in concretizing Asia’s aspirations and will be the bank that will build the 21st century’s Partnership for Progress in Asia. In this context, the role of infrastructure as one of the core drivers of growth assumes great significance.

In India, the investment in infrastructure needed to meet the aspirations of a billion plus people is huge. One Study estimates that over five years, 2017-2022, key sectors such as energy, transport and urban development will require investment of about 750 billion US Dollars. In this fiscal year 2018-19 alone, we have budgeted infrastructure spending of a record 90 billion US Dollars. AIIB will be an important pillar in meeting this requirement.

Developmental finance will be pivotal to meet the financing gaps in infrastructure. The role of multilateral development banks like the World Bank, The Asian Development Bank, The New Development Bank (NDB) and AIIB in poverty alleviation is immense, and they will need to facilitate development finance in close coordination amongst each other.

Particularly, the newly established multilateral development banks such as NDB and AIIB will have to collaborate with each other to develop innovative financing instruments, transformational projects and project processing mechanisms. This will enable greater access to finance for less developed and developing countries. These banks will also have to develop faster processes for loan disbursement & create efficient as well as flexible organizational structures give due consideration to country systems, wherever possible. These newly emerging institutions have the potential to redefine the contours of multilateral financing and set new rules for engagement.

Multilateralism has helped the world achieve inclusive economic growth across countries at different stages of development. We need to strengthen the multilateral cooperation to help us meet the challenges of climate change, economic slowdown in many parts of the world and rising protectionism.

India is a leading emerging market economy and has been an oasis of economic growth over the last 04 years. It is one of the most favoured destinations for business, trade and investment. The transformational reform of institutions and processes especially in industry as part of the ‘Make-in-India’ initiative has significantly improved the business environment in the country.

The Government has stressed upon ‘Ease of Living’, working towards ensuring the availability of basic amenities like electricity, water, housing, education and healthcare for all. Under the inspiring leadership of the Hon’ble Prime Minister of India, guided by his vision of inclusive growth for all, we have worked towards doubling farmers’ income and reigniting the entrepreneurial spirit of India, through a multi-pronged strategy.

As part of the Third Annual Meeting of AIIB, a number of Host Country Seminars have been organized on important issues centered on the theme, “Mobilizing Finance for Infrastructure: Innovation and Collaboration”. I am delighted that the distinguished participants have given bold new ideas to achieve our objectives. We hope to continue receiving your recommendations and support for formulating future policy. In this context, I hope you all have an engaging, stimulating and lively exchange of views during this Annual Meeting.

In conclusion “The Upanishads” from our ancient Indian texts state & I quote “the little space within the heart is as great as the vast universe.” Our meeting here is an embodiment of this philosophy – it is a meeting of open minds and hearts to achieve the universal goals of prosperity and progress.

I once again extend a warm welcome to all of you.

Thank you very much ladies & Gentleman

Jai Hind!

Thank you, Sachin. A warm welcome to all the distinguished delegates who have joined us today for this panel discussion with the Hon’ble Chief Ministers on the Vision of Infrastructure Development in India.

I am delighted that we are joined for this session by the Hon’ble Chief Minister of Maharashtra, Shri Devendra Fadnavis. We also have with us the Hon’ble Chief Minister of Uttarakhand, Shri Trivendra Singh Rawat Ji; the Hon’ble Deputy Chief Minister of Bihar, Shri Sushil Modi Ji; and we are also joined by Minister of State for Finance in the Union Government, Mr. Pon Radhakrishnan who has joined us on the dais.

I remember Virat Kohli mentioning ‘no cricket team in the world depends on one or two players; it’s always the team that plays to win.’ And in some sense that has been the approach of Prime Minister Sh. Narendra Modi when he got around to building trust between the Union Government and the state governments and truly bring about a federal system where the states have an equal voice along with the Centre in policy making, in execution of policies, in reaching the benefits of development to the last man at the bottom of the pyramid.

In fact, if one looks at the successful launch and implementation of the Goods and Services Tax, the GST, I believe there can be no better example of true federalism, cooperative and collaborative federalism at play than the finalization of thousands of items – GST rates, the finalization of the procedures and processes that would be implemented along with the GST and the entire process being run through complete unanimity. Not a single decision of the GST Council over so many meetings in the last few years has seen even one voice of dissent while implementing the GST.

We saw the 14^th Finance Commission being accepted by the Government of India by which we were able to have a larger share of the devolution of funds from the Central Government to the States being untied finances. Earlier on, 32% of the total devolution of funds used to go through an untied mean and the rest were through specific projects. Prime Minister Mr. Modi recognizing that different states have different development imperatives, different need for funds, it is best that we increase the allocation of funds which is untied from 32% to 42% as recommended by the 14^th Finance Commission. And we were actually able to give states more voice and more power to implement the projects which are suitable for the states.

On a lighter note, as the states are competing to grow, competing to perform, competing to meet the aspirations of the people in each state, we now have a story where states are competing with each other. So, when Prime Minister Modi was in Uttar Pradesh, he excited or ignited their interest to try and achieve a trillion dollar economy ahead of Maharashtra. And actually, when all the states compete amongst themselves to try and achieve aspirational goals, bold targets that’s when truly the potential of India will be unleashed and we will be able to see all round development and growth across different regions in the country.

All the schemes of the central government, by and large, get implemented through the states. So, be it the effort to take electricity to every home in this country in the next nine months – an ambition which probably many of us had never imagined to see in our lifetime, the generations of people living in remote villages, living in rural India who have been deprived of a basic amenity like electricity – will be receiving electricity for the first time. Within the next nine months, every home in the country, every willing consumer getting the benefit of electricity.

After all, that programme cannot be successful without the active involvement and participation of the states. And in that, every state has its own challenges. Maharashtra has a challenge to reach electricity to remote tribal areas, deep in the jungles, in the forests, sometimes left wing extremists affected areas. It’s a difficult proposition. Uttarakhand has a problem of taking electricity to remote homes, often at the top of a mountain or in very-very inaccessible terrains. It’s a unique situation.

Mr. Sushil Modi inherited from earlier times, a situation where more than half the population of the state did not have electricity in their homes, but they have taken up the challenge in right earnest and I dare say, the most successful rural electrification programme to reach power to every home would be carried out in Bihar, given the enthusiasm and the active involvement of the political leadership and the bureaucracy working together to give this basic amenity to every citizen of Bihar. And a very-very active programme on mission mode, I can see before my eyes being carried out in Bihar. Now, this kind of cooperation where Centre supports through finances, the states actively implement the Centre’s programmes is the way forward to reach development to every citizen of this country.

We are shortly going to launch the Ayushman Bharat programme where we hope to give free medical treatment worth almost 8,000 dollars per year to every family living below a certain threshold of income, which will cover nearly 500 million people in the country. Now, 500 million people getting the benefit of medicare – sometimes called ModiCare in India now – is truly transformational in terms of the future of these children, the future of these families.

Very often, many of us are aware families have got into distress largely because of debt taken during the course of an illness in the family. Now, all of these projects, be it our projects to take railways into the nook and corner of the country, be it our effort to revive the DISCOMs in the different states, be it the effort to take rural road connectivity to every home. All of these cannot be a success unless there was active participation of all the states.

And truly, this country today is demonstrating to the world the true meaning of federalism, the true meaning of working in partnership between the central government and the state governments, working as a team, working as a team to win, working as a team where the nation comes first, working as a team to meet the aspirational goal that by 2022, when India achieves 75 years, when we are celebrating 75 years of our independence, every citizen in this country should have a roof on his head, with clean drinking water and electricity 24X7, a good toilet in his home, good healthcare and education facilities in the vicinity, good transport and road access to the village and home.

And to meet that aspiration, to meet that goal, to meet that target in a short span of time, I think all of us in government at the Centre and the states, we are all equally committed. We are all passionate about the job that we have on hand. We are working together through different fora, through different means where we have the NITI Aayog giving us logistic support, where we have organizations like the Department of Industrial Policy and Promotion and the Invest India organizations working to bring industrialization to different parts of the country.

We are working on getting ease of doing business, cleanliness, getting the different states to work, both in collaboration and competition. And I think, that truly will be the game changing programme that we have launched over the last four years to bring about change in the lives of a billion plus people, a better future for the children of our country, a better future for the planet and India’s contribution to make the planet a better place to live in.

A warm welcome once again to all the Hon’ble Chief Ministers, the Deputy Chief Minister, my colleague in the Ministry of Finance, Mr. Radhakrishnan and to all of the distinguished delegates who have come to my home city of Mumbai. I hope you are enjoying the rain and I wish you wonderful stay in Mumbai and a happy journey back home.

Thank you very much

 

Question-Answer

प्रश्न : महाराष्ट्र के सीएम साहब ने जो दावा किया है वह आंशिक सत्य है, मैं कॉन्ट्रोवर्सी में जाना नहीं चाहता हूँ पर toilet-wise he is absolutely and 100% correct, आप उस पार्टी से हो जहाँ का प्राइम मिनिस्टर साहब बहुत सारे मिशन के साथ-साथ स्वच्छ भारत मिशन की बात करते हैं| आपने भी डेवेलपमेंट का और मिनिस्टर्स और सीमज़ की तरह कहने लगे| आपने यह भी दावा किया कि आपके बिहार से अब मैक्सिमम फ्लाइट जा रहा है| टॉयलेट आपने मान लिया कि बिलकुल ही एक्सेसिबिलिटी नहीं है 62%, तो सर is it not the failure? आप उसी को डेवेलपमेंट मान रहा है?

 

उत्तर: नहीं यही तो ठीक करने के लिए सब लगे हुए हैं| वह तो दिक्कत थी 70 सालों में….

Q: Sir, your Ujala project became inspiration for many, for energy conservations. Sir, can you design a task for combination of your administrators, and social and technology, young entrepreneurs to implement in a public to fight against many, you know, social challenges within a year or before next general election. This task force will not ask fund but help the government for building the nation and leading the world. Government platform helps to build the trust of international finance institutions and fast implementation.

A: I think that’s a very good suggestion. Any of us would be very happy to encourage youngsters like you to participate in good governance practices. And you are very right, if we can have a better social fabric and if all of society gets together, the Hon’ble Chief Minister of Maharashtra has embarked on the plastic-free Maharashtra. It can have truly game-changing dimensions for the future of Mumbai, for the future of our children. I recently was in Himachal Pradesh where Prem Kumar Dhumalji 10 years ago had introduced a plastic-free Himachal Pradesh and you can see visible signs of improvement, the greenery is much more, the whole of Shimla was much cleaner. So, we very much welcome you to volunteer to help us in changing or improving the social fabric of the country.

Thank you very much ladies and gentlemen and a big round of applause for all our panelists! Thank you for your participation.

Vasudeva Kutumbakam has been the ethos that India has practiced for centuries, and generations of Indians believe in Atithi Devo Bhava, and I am delighted that we have delegates from over 86 countries in my own city of Mumbai. Over 3,000 delegates, who have come to participate in this 3^rd Annual General Meeting of AIIB.

These are all signs of a resurgent India, an evolving India, an India that is becoming more and more relevant around the World. The fact that in a short span of 2 years, we have hosted in India three very major events related to multilateral development banks. We first had the New Development Bank Annual Meeting in India, followed by the Africa Development Bank meeting in Gandhinagar and now the AIIB in quick succession.

All of these reflecting the new found confidence that we have in our ability to host such major events and also the fact that the world is looking to India, as I said earlier in the day, probably the world’s biggest and best opportunity for the public sector, for the private sector, for multilateral banks, for international banks, for investment in infrastructure creation, for investment in technology, for investment in innovation, research. And it is this newfound confidence about India’s growing strength that is attracting international bodies to come and operate out of India, come and participate in this big opportunity that India presents.

We in India are delighted to be a part of AIIB. It is a matter of great pride for all countries and founding partner associated with AIIB that a concept that was first mooted in 2014 was able to mature in a short span of 6 to 7 months into an international agreement and by 25^th December, 2015, we actually had a Multilateral Development Bank in place, in operation with India as the second largest shareholder, holding over 8% of the stock of capital of the AIIB.

It’s again a matter of great happiness for us that amongst the lending that AIIB has approved so far, India is the largest recipient of development capital, development funds with over 25% of the fund commitment so far made by AIIB of about 4.2 billion dollars. We are the largest recipients in India.

In some sense, the growing need for multi-development banks in the Asian context also resonates very well with the thrust that the Modi government is giving to creating sustainable infrastructure in the country. We do believe that a robust framework, which is predictable, simple, easy to navigate and also very stable, is necessary for infrastructure to come into the country, investment to come into the country. We also believe that highest levels of probity, transparency and accountability are very important ingredients for the success of investments in infrastructure. And our energies and efforts in the last 4 years have been focused in creating that framework, which excites investment into India.

We have also had huge focus on sustainability – be it our programme to promote renewable energy in the country, be it our programme for the smart cities mission, be it the vision of Prime Minister Modi that by 2022, every citizen in this country will have a shelter on his head, with 24X7 electricity, with a good toilet, with clean drinking water, access by road to his village, to his home, internet connectivity through the length and breadth of the country to digitalise the economy going forward.

An honest economy where formal business will be the credo, will be the way we work, good healthcare facilities, good education in the vicinity of each ones homes and it is that new India that we are trying to create in which the role of Multilateral Development Banks, like the AIIB, are extremely important. We once again welcome all the delegates to our city to the city of Mumbai, a city which, I believe is great fun, is a lovely city, a city which has improved its rankings in the Swachhta index in the last year significantly, a city which is engaging with international global efforts for better quality of life for the people of the city, a city which is host to one of the largest bouquet of infrastructure projects under the leadership of Chief Minister Shri Devendra Fadnavis where we are looking at expanding the rail network, the metro network, the road network. A new airport coming up on the outskirts of the city, a trans harbour link to connect the island city to the mainland.

In one sense, truly reflecting the spirit of an emerging new India. So thank you very much friends from the media for the interest you have shown in this event, in this very-very important engagement that Mumbai and Maharashtra are playing host to and an engagement which all Indians are proud of.

Thank you

 Question-Answer

Q: Just want to ask the focus here with AIIB will be to, sort of, I don’t want you to comment so much as much on the competition that, you know, the funding agencies are buying for the slice of the Indian infrastructure pie as much as a comment on the focus of AIIB and how it will be different from the other multilaterals.

A: AIIB being a newer organisation has focused very deeply in creating robust processes within the organization. So, I must say that the risk controls, the auditing processes that AIIB has developed as an MDB are truly exceptional. They go beyond but we have seen in the past. So, that is one distinguishing feature of the AIIB. Also, the AIIB has restricted its focus investments to certain operational areas like rural infrastructure, energy and power, environmental protection, transportation and telecommunication, water supply and sanitation and urban development and logistics. So, largely, it’s very-very focused only on infrastructure projects, whereas many multilateral development agencies go even beyond that into a lot of social spending and social projects. The AIIB, as it stands today, is an organisation that will help create sustainability in the long run and I think the Asian context that it is focusing on is very important for India.

Q:

A: We are open. In fact, I met President Jin at Davos on 24^th of January earlier this year and he expressed a lot of interest in taking up the next level of high-speed corridor projects that India would envisage going forward and we had a very engaging discussion, particularly, on the Golden Quadrilateral and it’s laterals, which is the real area where we have a lot of demand for high-speed connectivity and AIIB would possibly be in the horizon for any such projects in the future.

A: If I can add to your question. Our financing needs are so enormous that we maximize our borrowings from all the multilaterals, including the AIIB, and not only multilaterals, but also bilaterals. So, the HSR funding from Japan which we used to do about 3 billion dollars a year is now expected to go up to about five billion dollars in year. So, we need our funds from everyone. So, everyone is welcomed. Thank you

Q: Goyalji, Umesh Kumar, senior journalist from Delhi, also a Mumbaikar. My question – Yesterday I asked one question to the vice president of the AIIB that is instead of investing only on the infrastructure, we have the backward areas like North Eastern states and Naxalite belt, why not focusing on horticulture areas, etc. My second question is, last year recapitalization government has kept some of the banks… I am just comparing just give me a chance. So, our banks, we have the capability like SBI is the giant bank, one of the biggest in the world. So will there be any business effect on our nationalized banks?

A: I think as regards the first question, every organisation has its niche strengths and this organisation’s strengths are in a certain level of focus areas on infrastructure which I just mentioned. There are other organisations which can support horticulture, agriculture and we do continue to engage with different wings of the World Bank, which are relevant to those projects, and certainly, our Indian Banking System is very-very strong and we are very proud of the Indian banks. They are doing yeoman’s service in the economic development of the country, but there is no contradiction between the two – these projects, the funding that the Multilateral Development Banks give are many times in conjunction with what other banks or the other financers give. There is no contradiction between the two.

Q: Hello sir, I am Tanya, I am from Mint. I have a question regarding the political context that AIIB works in. It’s widely perceived as being a Chinese led Bank and its investments are tinged with that context. We have seen one of the first projects that AIIB sanctioned was the China-Pakistan economic corridor towards rebuilding the Silk route. So, how does the Indian government respond to this, you know, are there particular concerns that you would have?

A: Well, I just mentioned, India is the largest recipient, almost 1.2 billion dollars out of 4 and half billion dollars that have been sanctioned so far, have been received by Indian projects – some in the public sector, some also in the private sector. They are already looking at a bouquet of almost 9 or 10 more projects to be financed in India. So, I personally believe every multilateral bank has many dimensions and one cannot dictate what projects they will invest in other countries. I think we should look at what we can do and what we can benefit out of such engagements rather than focusing our effort on trying to see what they should not be doing.

Q: So, there are no political concerns about the China-Pakistan corridor?

A: These are independent organizations. It’s not a Chinese-led or American-led or a European-led institution. It is always a multilateral Institution.

Q: 

A: Well, we will put up all our requirements to all Multilateral Development Banks and other available avenues of finance. Whoever gives us the best deal, we are open to it. DFCC is already fully financed, we don’t need any more funding.

Q: Both the DFCCs and the East and West corridors. These have been, funding has been tied up….?

A: …. in which Indian Government works. The democratic framework where rule of law prevails, the very good regulatory environment that we have in India and, today, I personally do not see money as a reason why we will not be able to do good projects. We have to build up our capacities and rapidly expand infrastructure which you have seen in the last 4 years. The thrust and focus of this government has been to expand our infrastructure across the length and breadth of the country.

 

Q: Sir, Debdeep Choudhary from the Japanese newspaper, Sankei Shimbun. In the earlier seminar also, it was mentioned that in the infrastructure projects in India, land acquisition is a big problem. The AIIB President also mentioned it. How is the government trying to meet this challenge, because we have recently seen in the bullet train project, some protests have come up in Gujarat and Maharashtra. So, what is the plan of the government in mitigating those challenges?

A: Well, we are working in a democratic setup and everybody has a right to raise issues, to make suggestions, to engage with new project authorities and I think it’s incumbent on any good infrastructure developer to take the local communities along with him, involve them in the development of the project and, certainly, highlight what would be good and how it would impact their lives in the future. While with the new land acquisition laws giving four times the market value for the land that is acquired, by and large, we have not faced any major stress in land acquisition any more in the country. There are pockets where, off and on, a little more engagement is required. I have discussed with both the Chief Ministers of Maharashtra and Gujarat and I think the discussions are at an advanced stage.

The environmental and social impact studies either have been completed or are nearing completion and I personally don’t see any stress in getting the land. In fact, the high speed rail corridor has even offered a larger compensation if the land is made available by the land owners by consent and that’s a nice, happy way to implement a project.

So, we have actually gone one step forward to offer an additional 1x of the market price of land. So, really instead of four times, we are willing to pay 5 times if the land comes through consent, otherwise, it will have to go through the acquisition mode. But to my mind, the villages both in Palghar, where there is a little pocket and in the Surat belt, both stand to benefit hugely from the high-speed rail corridor.

The entire stretch Mumbai to Ahmedabad will develop and blossom somewhat like the Beijing-Shanghai sector, which was mentioned in the seminar today as truly taken off as an engine of growth for China. Similarly, I see Mumbai-Ahmedabad as the first such corridor which will expand the economy in the entire region and we also hope to then take this to other areas of the country.

Q: Sir, This is Ashish from PTI. Sir, this was in context of your comments about probity and integrity being an important aspect for the government. Sir, we have seen actions against the Bank of Maharashtra brass.

A: Let’s stick to AIIB at this stage.

Q: Sene from Business Line. So, my question is since Indian banks have shut shops for investment to infrastructure companies, for infrastructure projects. Are we to assume that the only infra-financing will be now government and probably, multilateral agency driven, sort of, or you see some possibilities of private banks also investing in the infra sector?

A: Well, I don’t think Indian banks have shut shop. For a good project, there is no dearth of capital both debt and equity. So, to my mind, Indian banks will continue to play an important role in financing the infrastructural needs of the country. And we will supplement it with Multilateral Development Banks, with Government support. You have seen in the road sector, we have done a lot of hybrid annuity projects in the… we also have viability gap funding given out for many projects. Then, there are many projects where we mitigate the initial risk with government investing and setting up the project and then divesting it or monetizing it at a second stage when the project is mature. So, we are looking at all options and Indian banks will continue to finance such projects, good projects, good promoters. There will be no stopping or bar for that.

Q: I am correspondent from CCTV China. So, my question is – India has huge demand of investment in infrastructure sector. So, I want to know till now has already some project being supported by AIIB or not? And what do you think in future AIIB will help to contribute more? Thank you.

A: Well, so far, the AIIB has already approved several projects in India. I think out of the total 4.4 billion dollars of projects that have been approved, 25 projects which have been approved, India has almost 28%.

1.2 billion dollars worth of projects which have been approved by the AIIB. I am sure these are six projects which have been approved and now yesterday, they have approved a seventh project. So, the 1.2 billion dollars will become 1.4 billion dollars with their recent decision to invest 200 million dollars in the NIIF – the National Infrastructure Investment Fund. I think, another 9 projects worth 2.4 billion dollars which have been posed to the AIIB for funding, of which, four projects worth 860 million are non-sovereign funding, private projects. So, there is a good pipeline of projects that is under consideration of AIIB and we do hope to engage very actively in the future landing activities and future growth of the AIIB through different government and private projects in India.

Q: Sir, this is Anup Roy from Business Standard. What exactly is India’s plan for AIIB in the sense, equity contribution, more equity contribution?

A: See, we have 8.7% share – 20% is paid in cash, the rest is in commitments. Three instalments have already paid, which has been paid by all others. So, at this moment, there is no further capital call. Total paid capital of AIIB – 20 billion dollars – we will have 8.7 % of that.

Thank you

Good morning, ladies and gentlemen. We are discussing liquidity for infrastructure projects and as one of our experts explained; there is a lot of liquidity in Mumbai city today to welcome all of us. Thank you very much for braving all that liquidity and coming to what is quite clearly the most  important session of the AIIB’s second annual meeting, which is being held in Mumbai.

The theme of this panel – and I consider that the most important – ‘Mobilizing Finance for Infrastructure’ – and this is how it is laid out. We have with us two prominent representatives of two Asian countries – India and Indonesia – to tell us what Governors feel in terms of the problem of infrastructure financing, and we have three finance providers to tell us how those problems can be resolved from their point of view.

Before I introduce my very distinguished panel, just a word on the theme that we are discussing – one estimate of the total infrastructure needs for Asian countries in a single year is $1.3 trillion, of which the governments and the multilateral banks are able to provide about half from their balance sheets. How do you get the other half? That’s the question this panel is trying to tackle. And let me quickly introduce the guests we have, the host country and the person perhaps extremely qualified to speak on the issue, Mr Piyush Goyal.

Mr Piyush Goyal, of course, has been already handling a lot of infrastructure, Ministries; he has been Minister of Power and Coal, and now Minister of Railways, and standing in as Minister of Finance at the moment. So, I think most qualified to talk about both Finance and Infrastructure and I must also add that Mr Goyal is a chartered accountant by profession and, therefore, already knows what kind of problems – he has been at the board of several banks – so clearly understands what kind of problems finance faces to come into infrastructure and infrastructure faces to attract finance.

We also have with us Professor Bambang Brodjonegoro, the Minister of Planning from Indonesia. He’s also handled the Ministry of Finance. So, once again, eminently capable of handling both – infrastructure and finance.

And from the financing side, let me begin with Mr Piyush Gupta, the name I confused. Mr Piyush Gupta, CEO, DBS Group, again someone who has handled both retail banking and infrastructure or commercial finance and has a long stint several years in CitiBank before he became the head of DBS.

We have Dr Hajjar, who is from the Islamic Development Bank. Dr Hajjar is both an academic and a practising financier now, so can bring to bear so many issues that academia is trying to solve and bring to the board in terms of policy making. And, of course, we have the host of this seminar, Mr Jin Liqun, I hope I got the pronunciation right, Mr Jin Liqun, who, of course, heads AIIB and therefore is coming with a lot of ideas on how we can finance infrastructure.

Q: Well, with that introduction, let me begin with the host. Mr Goyal, partly because you are, of course, best place to speak about this problem, tell us what has been India’s experience in terms of finding money and exactly what the problem is in getting private capital into infrastructure financing?

A: Well, at the outset Lata, let me welcome all the delegates who have come in from different countries to my home city of Mumbai. We are delighted to have all of you here, and I hope you have a comfortable stay and enjoy the rain, as much as Lata and I do.

I think, to my mind, infrastructure today is one of the most important and engaging subjects when it comes to planning for the future of Asia. Different estimates about what is required to be done, you did highlight the problem between the world of finance and the world of infrastructure. But it’s somewhat like a marriage, it has to be a little rocky in the beginning, it goes through its stages of maturing and once projects are in line, you have all the requisite approvals, regulatory processes in place, land, finances tied up, then it becomes a smoother ride.

And, ultimately, when the entire project is complete, then it’s joyous, because it can transform lives. And to my mind, the infrastructure story in most countries – I am sure the western world would have gone through that at some point of time and Asia today is experiencing that. We in India have seen the development of infrastructure actually transform lives, actually help us go towards meeting the aspirational goals of a billion people. And for that, what’s most critical to attract private capital or even to attract multilateral finance companies to come into India is going to be a predictable, a very stable policy regime.

It has to be simple. It has to be easy to navigate. It has to be truly long-lasting. You can’t change the rules of the game as you go along. And to my mind, something which President Jin and I discussed yesterday, integrity of processes and integrity of individuals running those processes, both sides of the table, truly will define the availability of finance.

There was a time when the entire Asian continent has gone through periods where people distrusted governments and distrusted the processes that went through the process of awarding contracts for infrastructure. Indonesia has faced that period. India has faced that period. You can’t have a situation where you have projects which have licenses, subsequently getting cancelled, leading to a lot of distress to international investors or even domestic investors.

So, you will land up facing a situation where private capital will run away if it has to be faced with the legal issues or problems subsequent to contracts being finalized. It will also take away investors and public finances. I think that has been one of the most important elements of the change that we are witnessing today, a) the change in governments and governance practices, b) also the change in the mindset of the people of the country.

There is a lot more accountability demanded. There is a lot more monitoring of the work you are doing, and there is action taken if something goes wrong – action which is decisive, action which is visible. Therefore, I don’t feel any great pressure that we will have a problem of finance when we are doing the massive roll-out of infrastructure in India in the coming years.

Different estimates are made; we believe we will need about $4.5 trillion over the next 10 years at the minimum. Important challenges will be the cost of that finance – both equity and debt. Another important challenge will be to create the availability of local resources, build up capacity to actually implement this level of projects. And I am sure with the support of organisations like the AIIB, which are bringing in very high quality standards, high integrity standards and supporting also countries like India develop these processes, I would not think that finance will be a deterrence to the creation of the infrastructure India requires.

Q: Ok. That is good to hear, if you are confident that finance will come, but yes, I think the Minister has put in the very important issues that private finance will face, especially if decisions taken are revoked by a subsequent court or by a subsequent administration. That will be the big thing that India has learned the hard way.

Well, so two or three key takeaways. One, of course, policy risk across regimes, which are natural in a democracy and brown field is more attractive to private capital than perhaps green field. But I just want to – it’s usually the role of the press to find faults in governments especially, but I must tell you that the current government has not turned over policies. I mean the land acquisition rule was a continuity.

A: Not a single one. I will respond if you give me a minute.

Q: I will in a minute, after the initial reactions. And, as will the Jan Dhan the entire edifice of Digital India is based on, the UIDAI which was started by the previous government. We didn’t try to reinvent the wheel, I think most policies – policy continuity was not an issue.

A: Since 1991, almost no policy has been changed in the Indian setup, Indian government, despite almost 8 or 10 governments coming and going. Not a single policy change, not a single effort to try and dislodge contracts already executed, save and except, a couple of occasions where irregularities were found in the process, where the courts have overturned certain decisions. But in terms of government, despite all the acrimonious politics India may have had over the last 30 years, by and large, a decision once taken by any government, the next government has only built upon that and not changed midway. Every one of them!

Q: Absolutely, I mean a whole host of right to information, right to education of the previous governments has been continued, and as Mr Goyal was saying that’s been at least a sophistication and ….. that we have achieved and I am sure that would be the experience in other democracies as well.

Q: Actually, Mr Goyal I am sure you want to respond to some of this, but also you have seen under previous governments and as your stint as a chartered accountant yourself and a bank board member, what are the learnings from PPP – Private Public Participation, in India that you perhaps may be able to share?

A: Well, couple of things before I go further. To Piyush’s point about the financing gap, my own experience is that as President Jin said that if the project is well conceived, if the risks are mitigated to a reasonable level, finance is never a problem for any good project. After all, you have a billion people aspiring for a better quality of life and there is not too many places in the world where money can be invested or profitably invested. And the Indian track record, by and large, is still a safe record for most international investors.

We have the rule of law in India, which is missing in many countries. We have a robust framework in which you have media; you have public response coming in if you don’t implement projects in time – good or bad – for and against. And I think ultimately, our track record that in 70 years of independence not a single international default – neither has the central government nor any state government, never ever defaulted in any international loan or in international commitment taken for development of infrastructure.

Similarly, no public sector enterprise has ever defaulted internationally. All of these things matter when we are going out to raise funds. I have been raising funds, for example, for the renewable energy sector earlier on, now for the railways. On every project that we have tried to raise funds, we have more people willing to invest than the amount of money we require.

For example, when the Japanese funded our bullet train project, we already have a number of agencies talking to us – when are you announcing the rest of the bullet train or the rest of the high speed train corridors so we can participate in that. After all, where else in the world are you going to have this kind of safety and this kind of aspiration of a billion people, a market of this size.

So, to my mind, I truly believe and I would like to join issue with Piyush on that, money will not be a constraint for a project in India, if as President Jin said well-conceived risks mitigated. And we have used that to good measure; let’s say in the renewable energy sector. We worked with the international investors, both private and government. So JAICA, JBEK, large investors, private equity funds, we worked with them and created that framework which gives them comfort on payments, which gives them reliability of contract over 25 years.

We roped in the state governments, central government and our own financial institutions to provide first loss guarantee or credit enhancement. So, all of this is possible. We have Mr Upendra Tripathi, who is one of those who has really led from the front the growth of the renewable energy programme and now is Director General of the International Solar Alliance.

Similarly, in the railways, to my mind, you have a sovereign rated agency now raising funds for investments in the railways, and the way we have conceptualised it, we are almost going to double the finances or the revenues of the railways over the next 7 years.

Now with that kind of capacity enhancement at an affordable price where we are using our existing assets to good measure, I think it is a very viable investment opportunity. There have been challenges and challenges in a democratic setup are going to be there. We are going to have a little bit of politics come into a project, so you want to set up a refinery in a particular place, there will be a local issue, you want to set up a nuclear plant there will be certain local  issues.

But I think that gets factored in when you look at the large business opportunity; private sector is basically entrepreneurial in nature. I have been in the private sector and we love taking these kinds of challenges and that’s where we make most money in the private sector. If it’s going to be a simple roadway and the entire route is going to be marked with roses, then the private sector is not going to make the kind of profits or returns that they are looking for.

So, to my mind, it’s important and incumbent on all governments to create that conducive environment, to work closely with both financers and the private sector, so that issues can be resolved and fast tracked. I agree with President Jin that project delays probably cost far more than the struggles we have over few basis points. But I think both are equally important, we have to start getting into the act of executing projects on time.

I will give you a simple example. In Uttar Pradesh, there was a highway that was conceptualised. It’s a almost $2 billion project……. has now got nearly 98 or 99% of the land in hand and is now doing the bidding once again. Our Chief Minister of Maharashtra, the host state, is doing the Mumbai-Nagpur freeway on the same model as President Jin said where he is involving the local population as stakeholders in the project.

In fact, Maharashtra had this model even 30 years ago, when I started my career. The Maharashtra Industrial Development Corporation would, let’s say, acquire 5 acres of land from somebody, but they would give back half an acre post the development of the entire region back to the land owner to do some service business or some activity and by that time the land value would have enhanced probably 10 or 20 times. So he would not only get paid for his whole land but get back 10% of the land where he set up a hotel or he set up some utility centre or some services, which gave him a long term sustainable income.

Very often, we are not looking for stake in the project, because that risk taking ability is not there in a poor farmer, or a poor land holder who only has a small piece of land. So if you tell him you put it in as equity but don’t get any cash in return today, it’s not going to work. You will have to do a mix of both; make him a stakeholder yet pay him upfront.

And India has now created a very robust framework where land acquisition is not so much a challenge. There is a lot of politics in many of our projects, but that’s very often different from what is visible on the streets and what is the reality behind curtain. Because everybody wants development in the country and ultimately beyond a stage when you oppose development, the people tend to give it back to you in the next election.

So, I think a robust democratic framework which we have in India is really the strength which empowers me to say that money is safe in India, the rule of law prevails and I still believe Piyushji that I have never seen money as a constraint for a good project. It may be a constraint when you are trying to literally do something which is at a zero RoR, or a very low RoR, in which case the government in India now steps in with viability gap funding, hybrid annuity models, different models by which we bring up the rate of return and make the project attractive.

Q: Maybe one project has coordination officer for every project.

A: Easier said than done, there are different agencies involved. We have the single window system in many states in many central projects. In fact, Prime Minister Modi has a very unique method by which he conducts on every last Wednesday of the month a programme called ‘Pragati’ where he himself directly video-connects with all the 29 state Chief Secretaries and the administrators of all the Union Territories, and a bouquet of projects is taken up for consideration and discussion, which also come from bottom-up.

So people push up to the Prime Minister’s office what are the challenges they are facing in different projects. So, let’s say I have the bullet train going on, and you are all aware that there is a little challenge we are having on small piece of land through the acquisition cycle. So that went through a Pragati engagement where both the State Chief Secretaries made time-bound commitments and discussed the process and the challenges they were facing.

So this is the kind of direct interface, so you have a situation here, forget the project officer – the Prime Minister is willing to become the project officer to kick-start and expedite projects.

Q: Will you buy it?  If they come with a cross default clause?

A: Well, I think both are right in different projects. I fully agree with President Jin that we cannot have MDBs getting into very high risk projects and defaulting. They are ultimately going back to the sovereign, it more the sovereigns who are the principal promoters or financers. And the day we will have MDBs failing or even a single MDB having a stress on their balance sheet, it will actually shake the international financial system very badly. So we will have to continue to have the MDBs who provide relatively lower cost financing, focus on very strong projects, very often insisting on sovereign guarantees or very safe projects. And all of us must collectively try and strengthen their balance sheet and strengthen the future. They have a big role to play in the international financing.

Q: If they say that I am providing 10% and the private sector is providing 40%?

A: I will come to the first clause. I think it very much depends on the nature of project and the country we are dealing with. You rightly said that India has a very robust framework on inflation control and the fiscal responsibility. In fact, even when this was not there, if you look at the last 27 years, post 1991, Indian rupee has not depreciated more than 3 or 3.1% CAGR over the last 27 years.

So we may have had certain ebbs and dips and stuff like that, but by and large, in the long term, we have been a very stable currency and a stable country to invest in. And, possibly that encourages me to think in terms of whether the sovereign as Mr Gupta rightly said should engage with some kind of a comfort to investors on foreign currency long term risks. We actually could consider doing that; it’s not a bad idea at all. The sovereign could provide some kind of a backstop on currency risks, knowing full well that a 27-year experience and now with even more robust processes in place, we are at a fairly safe wicket there.

In fact, if you see the Indian currency; 2013, we were Rs 68 to a dollar. We borrowed $32 billion through FCNRB accounts, brought that down to 62-63, which is when we came in. We repaid that entire $32 billion and we are still only at 67-68. So if you see a 5-year period, there’s been almost no depreciation, having paid back that $32 billion that temporarily helped to bring down the dollar rates.

So, I think the safety and comfort of a country risk is getting more and more defined over the last few years. As regards the small projects, I don’t think the MDBs can really engage directly, they don’t even have the bandwidth. So it will have to be, as President Jin said, through multi-layering of their investments, but ensuring that there are robust processes at the second layer, which will then go into smaller projects.

And as regards the first loss, it’s a very-very robust financing mechanism. I support that mechanism, but who should be doing it is a question mark. The first loss mechanism worked in the wind sector, because there is no OPEX. It’s a completely CAPEX driven project, where you have a defined amount of electricity being generated. Most countries have created a robust framework where renewable energy is a must purchase item.

So the risks are already mitigated in the regulatory framework, their taking of first loss risk helps to bring down the cost of the project, bring down the interest cost in the long run, and keep projects like wind or solar at a reasonable price, but a road project. Ultimately, you are only doing a projection of the traffic and the risks are certainly larger, so there one will have to see whether governments can provide that first loss. But I don’t know whether banks or multi-lateral agencies can provide…..

Q: No. My point was that banks may come in private sector if multi-lateral agencies took the first loss?

A: I think the governments will have to take it, because it’s very country-specific. So you have 86 governments participating in the AIIB for example, but the lending is not necessarily equally distributed. Now that would actually become a deterrent for many countries who may think that, well, if AIIB is investing very largely in country X and the investors at the base level they will think that country X has a higher risk profile then that will deter investment profile.

Q: Okay, that might disturb the entire multi-lateral game altogether.

A: A thought came to my mind, which President Jin may like to consider. We could actually look at institutions like AIIB creating subsets where the local government, some multi-lateral agencies and possibly even some private players could pool capital which will create the first loss…. it’s like an insurance pool and may be get a larger return on their investment. So we could look at some such engagement.

A: I can briefly say one thing that today, the country is looking at greater engagement with innovation. In fact, my Chief Minister of Maharashtra was in the silicon valley barely a week ago talking to companies over there in what new technologies, and he actually visited even the hyper-loop facility, which no other country in the world has as yet decided to use or implement.

Look at India’s example on the LED programme, for example, while other countries are still discussing about energy efficiency and climate change and what they would do to protect the planet, India quickly embarked on the LED programme. And in barely three years, today we are an almost 100% LED country and we have been able to drive down prices by about 87%, because of which the whole world is benefitting.

Anywhere in the United States or Europe when I go, they compliment us for the great thrust in LEDs. India has saved about $6.5 billion on consumer electricity bills annually for an investment as low as a billion to $1.2 billion. So, that’s the kind of benefit innovation can get even to an emerging economy. In fact, Prime Minister Modi is going to be coming in tomorrow for inaugurating the board of Governors’ meeting, and soon after that, he’s engaging with Indian corporates in a closed door where the issue we are discussing is what can we do to bring R&D spends to India, to bring innovation to India. Largely, that’s the agenda of the meeting.

So I think we have a huge appetite in India and the people of India want to engage with more and more innovation. Look at what’s happened to the data world, India has become one of the world’s largest consumers of data in a short span of 2 or 3 years. So, we believe very strongly that there is huge potential of a billion people. We are not looking at going up the development curve in stages. Look at electric vehicles; we want to just leapfrog getting into the electric vehicles phase, rather than every Indian first owning a petrol car and then changing to an electric car. So, I would welcome any initiatives on that.

Ends.