India, US ink Investment Incentive Agreement: – INSIGHTSIAS

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GS Paper 3:

Syllabus: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

 

Context:

India and the US have signed the Investment Incentive Agreement (IIA).

  • This agreement is expected to lead to enhanced investment support from America’s development finance institution in a wide range of sectors.

 

Things you should know:

  • The agreement supersedes another similar pact signed between the governments of India and the US in 1997.
  • The agreement is a legal requirement for the US International Development Finance Corporation (DFC) to continue providing investment support in India.
  • Services offered under this agreement include debt, equity investment, investment guaranty, investment insurance or reinsurance, feasibility studies for potential projects and grants.

 

Significance of IIA:

DFC or its predecessor agencies have been active in India since 1974 and have provided investment support worth $5.8 billion, of which $2.9 billion is still outstanding.

  • It is expected that signing of IIA would lead to enhanced investment support provided by DFC in India, which shall further help in India’s development.
  • The agency has provided investment support in sectors related to development, such as manufacturing of Covid-19 vaccines, healthcare financing, renewable energy, financing of SMEs, financial inclusion and infrastructure.

 

InstaLinks:

Prelims Link:

  1. About the Investment Incentive Agreement (IIA).
  2. US International Development Finance Corporation (DFC) – Functions.
  3. Different agreements between India – the US.

Mains Link:

The US economy is driven by consumption and the Chinese economy is driven by production, the Indian economy is driven by trade and services. To which category does Indian start-ups belong to? Discuss their strengths and weaknesses.

 

ATP- Ace the Prelims:

Q.5) Investment Incentive Agreement was recently signed between India and:

    1. The US.
    2. Japan
    3. China
    4. None of the above.

Sources: Hindustan Times.

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