The Japan International Cooperation Agency (JICA) has signed a Japanese ODA loan agreement with India Infrastructure Finance Company Limited (IIFCL) in New Delhi to provide up to JPY50 billion (US$439.5 million) for PPP projects.

Despite current remarkable economic growth of India, infrastructure needs to be fostered for continuous economic growth. Infrastructure development in India requires huge funds, whereas the Government of India has limited financial source. Therefore, private finance through PPP infrastructure projects has been proactively promoted by the Government of India.

On the other hand, infrastructure investment by the private sector recently remains stagnant due to the delay in land acquisition and various government approval processes, the deterioration of profitability by excessive competition, and so on. In addition, commercial banks, which are main resources of private funding in infrastructure development, also have difficulty in providing long-term funds to infrastructure projects because of the asset–liability mismatch and the rise of risk tolerance especially for road and power sector. Furthermore, the capital market for long-term funding to infrastructure projects has not yet been well developed in India.

In these circumstances IIFCL, the Indian government owned financial institution established in 2006, is expected to more actively provide long-term funds to infrastructure projects. JICA provides loan to IIFCL with sovereign guarantee under this project and IIFCL will be able to supply long-term funds for infrastructure development. This project promotes development of infrastructure by PPP and economic development through more use of private funds in India.