India and the U.S. recently inked a new Investment Incentive Agreement (IIA) in Tokyo, Japan. The current agreement supersedes the original one signed in 1997 and is designed to align with significant developments such as the formation of the Development Finance Corporation (DFC). This new organization replaced the Overseas Private Investment Corporation (OPIC) after the U.S. passed the BUILD Act in 2018.
The IIA aims to facilitate various investment support programs offered by DFC. These include debt, equity investment, investment guaranty, investment insurance or reinsurance, feasibility studies for potential projects, and grants. The agreement’s signing is crucial as it forms a legal framework for DFC continuing its investment support in India.
An Overview of DFC’s Activities in India
Since 1974, DFC and its predecessor organizations have been actively supporting India, providing investment worth $5.8 billion so far. Of this amount, $2.9 billion is still outstanding, and an additional $4 billion worth of proposals are under consideration. DFC’s investments focus on sectors crucial for development, including Covid-19 vaccine manufacturing, healthcare financing, renewable energy, SME financing, financial inclusion, and infrastructure.
Current Status of India-US Relations
India and the U.S. share a “global strategic partnership” built on mutual democratic values and converging interests on bilateral, regional, and global issues. This partnership was further reinforced by the Delhi Declaration of Friendship and a Joint Strategic Vision for Asia-Pacific and the Indian Ocean Region, both issued in 2015.
Major Milestones in Bilateral Cooperation
Key milestones in the India-U.S. partnership include the signing of the civil nuclear cooperation agreement in October 2008 and the establishment of the Joint Clean Energy Research and Development Center (JCERDC) under the Partnership to Advance Clean Energy (PACE). Additionally, the countries launched the 2030 India-US Clean Energy Agenda at the Leaders Climate Summit in 2021.
The two nations also strengthened defense relations through the ‘New Framework for India-US Defense Relations’ and successfully formed the QUAD alliance with Japan and Australia. The Malabar exercise conducted in November 2020 further highlighted the growing strategic ties, featuring all four QUAD members for the first time in 13 years.
Trade and Science & Technology Collaborations
On the trade front, the U.S. became India’s second-largest trading partner and a significant destination for India’s exports of goods and services. It replaced Mauritius as the second largest source of FDI into India during 2020-21.
In the realm of science and technology, the Indian Space Research Organization (ISRO) and the National Aeronautics and Space Administration (NASA) are jointly developing NASA-ISRO Synthetic Aperture Radar (NISAR), a microwave remote sensing satellite for Earth observation.
India’s Role in Global Context
India has been making strides as a leading player in the international system currently experiencing a transformative phase. By leveraging its strategic partnership with the U.S., India can explore opportunities that safeguard its vital interests and manage differences while seeking new possibilities.
