Foreign Investment Opportunities in the Delhi-Mumbai Industrial Corridor

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DELHI – Spread out across more than 1,500 kilometers and six different Indian States, the Delhi-Mumbai Industrial Corridor (DMIC) is one the most ambitious Indian infrastructure projects in the nation’s history. Undertaken in collaboration with the Japanese government, the DMIC is set to consolidate India’s growing role as a global manufacturing and trading hub while boosting the nation’s economy in the process.

When completed, the DMIC will feature an industrial zone spanning the length of the corridor with “smart cities” that will accelerate the expansion of industry and infrastructure throughout the region. One of the main goals of the DMIC is to foster a stronger, globally competitive economic base in India that additionally creates favorable conditions for local commerce, foreign direct investment and long-term sustainable development.

The first phase of the project focuses on the development of seven new industrial cities by 2019, and is already in process.

In terms of impact, the DMIC will seek to double employment with a projected 15 percent compound annual growth rate (CAGR). Industrial output and exports from the region are expected to triple and quadruple, reaching CAGRs of 25 percent in manufacturing and 32 percent in exports. The impetus for continued economic development in the DMIC will be guaranteed by the continuous development of a dedicated freight corridor, power plants, water supply infrastructure and modern logistical facilities.

The DMIC will be an essential component of India’s future economic development, but will not be realized without adequate funding.

Currently, the first main channel of funding includes Public-Private Partnerships (PPP) via Viability Gap Funding (VGF). These provide upfront grant assistance of up to 20 percent of the project cost for state or central PPP projects implemented by a private sector developer selected through competitive bidding. VGFs are expected to be rendered by the Asian Development Bank (ADB) and World Bank, while loans will be provided to infrastructure companies by India Infrastructure Finance Company Ltd. (IIFCL).

The second main source of funding is the Japan Bank for International Cooperation (JBIC). Japan has taken the lead in securing funding for the DMIC through the JBIC and is currently a main project stakeholder with a 26 percent share. The only conditions on JBIC investment entail the granting of up to 85 percent export credit to Japanese companies importing products to India in line with OECD terms and conditions. The JBIC also offers overseas investment loans to support overseas investment by Japanese firms into India.

Multilateral agencies such as the ADB and World Bank have welcomed efforts by the Indian government to facilitate the DMIC through VGF and the IIFCL, and the promotion of PPPs.

DMIC regions are divided in two groups: the Investment Regions and Industrial Regions. Each group assigns a specific function to affected regions.

Investment Regions

  • Dadri-Noida- Ghaziabad Region in Uttar Pradesh – General Manufacturing
  • Manesar-Bawal Region in Haryana – Auto Component/Automobile
  • Khushkhera-Bhiwadi-Neemrana Region in Rajasthan – General Manufacturing/Automobile/Auto Component
  • Bharuch-Dahej Region in Gujarat as Petroleum – Chemical and Petro-Chemical Investment Region (PCPIR)
  • Igatpuri-Nashik-Sinnar Region in Maharashtra – General Manufacturing
  • Pitampura-Dhar-Mhow in Madhya Pradesh – General Manufacturing

Industrial Areas

  • Meerut-Muzaffarnagar Zone in Uttar Pradesh – Engineering & Manufacturing
  • Faridabad-Palwal Zone in Haryana – Engineering & Manufacturing
  • Jaipur-Dausa Zone in Rajasthan – Marble/Leather/Textile
  • Vadodara-Ankleshwar Zone in Gujarat as General Manufacturing
  • Industrial Area with Greenfield Port at Dighi in Maharashtra
  • Neemuch-Nayagaon in Madhya

Most recently the Cabinet Committee on Economic Affairs approved a new Solar Power Project at Neemrana – a vital step towards the DMIC being realized. This taken together with low-cost Japanese funding, the DMIC appears set to provide a promising boost to India’s economy when completed.

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