The Indian Development and Economic Assistance Scheme (IDEAS) is a scheme under the Department of Economic Affairs, Ministry of External Affairs. It streamlines LOCs offered to various countries in South Asia, Southeast Asia, Africa, and Central America. The government has been providing LOCs under this scheme since 2005 and the first extension to the scheme was in 2010 and the second extension in 2015. India is the 6th largest economy and has always pursued a policy of economic cooperation with other countries through bilateral and regional coordination.
What is a Line of Credit?
Line of Credit is a financing mechanism in which India’s Export-Import (Exim) Bank provides support for the export of projects, equipment, goods, and services from India. Exim Bank extends lines of credit on its own and also at the behest and support of the Government of India for various development-related and capacity-building projects across continents. LoCs are an important component of India’s diplomatic strategy and are very useful in generating goodwill and building long-term partnerships. They also promote India’s political and economic countries abroad by promoting it as an emerging economic power, investor country, and partner for developing countries.
The Government of India extends development assistance in the form of concessional Lines of Credit under the Indian Development and Economic Assistance Scheme (IDEAS) through the Exim Bank of India. The Exim Bank raises resources from the market and provides LOCs to the recipient governments at concessional rates. The Indian government backs these by signing a deed of guarantee in favor of the lending bank to guard against any default by the borrowing government in payment of interest and principal to the lending bank and also supports the Exim Bank by way of paying IES ( the difference between the cost of borrowing and concessional lending rate).
A selects projects keeping in mind diplomatic considerations and requests received from developing countries. The project proposals are examined by the Standing Committee. After the Committee and the Finance Minister give their approval to the project, IDEAS issues a formal letter conveying sanction of the Line of Credit, which can be operated through Exim Bank or any other willing bank or lending agency with the approval of the Finance Minister.
Projects cover critical infrastructure sectors like power generation and distribution, agriculture and irrigation, transport connectivity through railways, ports and roads, manufacturing industries, education, healthcare, and capacity building.
The focus is on regional connectivity and growth initiatives in the Indian neighborhood that will act as force multipliers to accelerate regional growth and development, enhance more people-to-people contact, and encourage trade and business.
Though India enjoys goodwill across continents as it does not impose projects or be prescriptive, a major issue is delayed project implementation for various reasons including delays in meeting deadlines. Timely completion of projects has recently become a major area of focus for the government. LOCs are now being given to partner countries across continents for large-scale and complex projects as project exports from India.