India needs to outflank China in Africa: Exim Bank CEO Rasquinha

India need not be afraid of China's growing investments across Africa, as the size of the continent assures growth for all and intelligent Indian investments will ensure growth, David Rasquinha, Managing Director and Chief Executive Officer of the Export-Import (Exim) Bank of India, said. 

"Why do we have to take on the Chinese? There's enough business for all of us together. The infrastructure needs of the African continent surpass the capacity provided by institutions from India, China, Japan, Korea, and the US. There is enough business for all of us," Rasquinha said.

Adding that exporters needed to outflank the Chinese and not fight them, Rasquinha said exporters need to tie up with Japanese companies. Japan is known as a source of project finance with a low cost of capital, but with a dwindling birth rate has seen labour costs soar. "If you're worried that the Chinese are offering a lower rate of interest, the Japanese can offer an even lower rate and if you go as a subcontractor or as a consortium partner to a Japanese Consortium, you can get the benefit of the trade since Exim Bank will provide a credit guarantee," he said.

In 2018-19, the bank has sanctioned funded and non-funded assistance to corporate houses amounting to more than more than Rs 11.36 billion for part financing their overseas investment in eight countries. Now, the bank is pushing for project exports. An Exim Bank study has shown contract awards for projects financed by global multilateral development banks (MDBs) amounted to nearly $155.7 billion during 2014-2018, indicative of immense opportunities for project exporters in India. Indian companies secured contracts amounting to $21 billion during this period in projects funded by the major MDBs.

"Foreign buyers of project exports rarely approach financing as an afterthought. Rather, financing is regularly a core component of evaluating bids and identifying sourcing—complete with weighting scales on relative financing terms," Rasquinha said.

Outfinancing China

He, however, said that India had no plans of ramping up development financing grants to African nations under the Indian Development Assistance Scheme (IDEAS), considered a crucial foreign policy tool used by New Delhi to win over strategic and business opportunities in the continent.

"Ever since the last revision to the guidance, which was done in December 2015, the process has been cleaned tremendously. It is now top quality companies who are getting business while the number of complaints has reduced. But then again ideas does not focus on a particular geography," Rasquinha said.

Indian policymakers have been cautious of Beijing's move to economically connect Africa with Asia and Europe through its ambitious Belt and Road Initiative (BRI). While China has committed to invest $126 billion across the region under the BRI, India has tried to counter this through increased disbursals of Lines of Credit (LoC). 

An LoC constitutes loans to promote bilateral economic relations. Under it, a minimum 75 per cent of the contract value must be sourced from India in the form of goods and services, including for consultancy services. A relaxation of 10 per cent is made on a case-to-case basis.

In July, the ministry of external affairs informed Parliament that 279 LoCs, aggregating to nearly $27.91 billion, had been extended to 63 countries since 2005-06. Of these, 191 LoCs to the tune of nearly $11.58 billion had been extended to Africa, or 40 per cent of all LoCs.

The Exim Bank is also on track to raise the targeted $2 billion from domestic and international markets in 2019-20. It has raised more than $300 million from the Japanese market and positive feedback from outreach programmes, such as roadshows, signalled the target would be comfortably met by the end of the financial year, Rasquinha said.