India mulls reforming credit terms for other countries, may link to projects
NEW DELHI : India is considering reforming the lines of credit (LoCs) it grants to other countries to improve its economic diplomacy, persons aware of the matter told Mint. Proposed reforms include granting project-specific and fixed-period LoCs rather than generalized lines spanning several projects, the persons said, requesting anonymity. These proposed reforms, which come after requests from the borrower nations, will help reduce the interest burden on these countries, one of the persons added. So far, India has extended over 300 lines of credit to 65 countries with an estimated value of $30 billion.
At present, lines of credit have long maturity periods, with interest moratoriums lasting around five years. However, the borrower nations may prefer project-specific lines of credit that will reduce their interest servicing burdens, the person cited above said. The government is also considering revising Indian content requirements to improve the implementation of projects in Africa, it added.
Under the current Indian Development Assistance Scheme (IDEAS), Indian content requirements for LoCs stand at a minimum of 75%, with a possible relaxation of no more than 10% on a project-by-project basis. In addition, these lines of credit could be tweaked to better account for price variations for project materials over time, while changes to project monitoring are also being considered. The ministry of external affairs didn’t respond to emailed queries.
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