Russia invited to invest in Indian industrial corridor

India has invited Russian investment in the Delhi-Mumbai Industrial Corridor (DMIC) project, a corridor of opportunities for foreign investors.  In case, Russia accepts the Indian offer, $90 billion project would provide a win-win scenario for both sides.

Diplomatic sources say that the proposal to Russia on DMIC would likely figure high on the Indian agenda during Vladimir Putin’s talks with Manmohan Singh at the 13th Indo-Russian annual summit on December 24.

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The Indian offer was made by then-External Affairs Minister S.M. Krishna during his joint press interaction with the visiting Russian Deputy Prime Minister Dmitry Rogozin in October. “Our growing economy and major initiatives in terms of the national manufacturing policy and infrastructure development projects such as the Delhi-Mumbai Industrial Corridor, offer good prospects for Russian investors and businesses. In this context, I also informed Deputy Chairman Rogozin of the measures taken recently to liberalize foreign direct investment norms in prospective sectors of retail, civil aviation, telecommunication and insurance,” Krishna had said.

This is probably the first time when India has invited investment for the DMIC project from a third country at such a high political level. Thus far the DMIC project has been a bilateral affair between India and Japan. The Japanese are not just the major stake-holders in the project but also happen to be its prime movers and shakers and there is nothing to show on the ground that the Japanese have been hesitating to loosen their purse strings for the project. Japan is providing financial and technical aids for mega infra-structure project, covering an overall length of 1483 kilometres between the political and the business capitals of India -- Delhi and Mumbai respectively.

The USP for Russia

Knowledgeable sources say that the DMIC project would inevitably increase the already very strong Russian strategic footprints in India if Moscow were to accept the offer. Its USP for Russia would be that it would enable Russia to get involved in sector-by-sector developmental story of India.

The project covers an area of about 400,000 sq.km and six states with a population of 178 million (17 percent of India’s population). There are 15 ‘million plus’ cities in DMIC.

This project incorporates nine mega industrial zones of about 200-250 sq. km., high speed freight line, three ports, and six air ports; a six-lane intersection-free expressway connecting India’s political and financial capitals and a 4000 MW power plant. Several industrial estates and clusters, industrial hubs, with top-of-the-line infrastructure would be developed along this corridor to attract more foreign investment. The project is to be funded by the Indian government, Japanese loans and investment by Japanese firms and through Japan depository receipts issued by the Indian companies.

The Likely Russian Response

The Russians are linking acceptance of Indian offer on DMIC to Sistema. Rogozin dropped hints to this effect in his talks with his Indian counterparts. A total of $3 billion in Russian involved: $600 million of the Russian government and $2.4 billion from Russian oligarchy. The oligarchy has been exerting lot of pressure on the Russian government which in turn has been pushing the envelope with the Indians.

 The Indian government's stand is that there is nothing much it can do in the Sistema case, considering that the matter is pending before the Supreme Court. As for India, it will surely make a strong pitch on the DMIC offer with Putin.

There are two likely scenarios. Putin makes it clear that Russian investment in DMIC is predicated on how India delivers on Sistema and neither of the two issues is mentioned in the Joint Statement to be issued at the end of Putin’s India visit. Or Putin may agree to put DMIC on record and make a specific mention to Moscow's eagerness to accept the Indian offer in the Joint Statement at the end of the visit, if he gets firm assurance from none other than Manmohan Singh that he will do his best to sort out the Sistema issue.

The Russian decision on the Indian offer on the DMIC project is likely to be conveyed to the Indian government during Putin’s upcoming India visit.

The writer is a New Delhi-based journalist author and strategic analyst.

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