National Investment and Infrastructure Fund (NIIF) - Lucent For GK - UPSC

Introduction

Background of NIIF

• SEBI constituted the 21 member committee under the leadership of N R Narayan Murthy, Infosys Co-founder 
• The committee was named Alternative Investment Policy Advisory Committee (AIPAC) 
• On the recommendations of the committee, Alternate Investment Funds (AIF) were established as start up eco system in India 
• AIFs are private equity and hedge funds defined in SEBI Regulations 
• Any form of privately pooled investment both from foreign or India origin in the form of a company, trust, body, corporate or LLP are classified as AIF 
• AIFs are established to raise capital to reach a size of as much as 2 % of the GDP 
• NIIF is established as a Category II AIF 

NIIF – Establishment

• NIIF will be established under SEBI regulations 
• NIIF will be financed by GOI with 49% equity 
• The rest of the funds will be done through foreign and domestic partners 
• Initial corpus amount of NIIF is 40000 crore rupees 
• The amount of NIIF will be changed from time to time

Objectives of NIIF

• To maximize economic impact through infrastructure development 
• Investments made in brown field projects, green field projects, stalled projects and commercially viable projects 
• NIIF would allow equity participation from anchor partners 
• NIIF would also undertake nationally important projects 

Tax Benefits of NIIF

• Investments made through NIIF enjoy certain tax benefits 
• Exempted income of NIIF is not taxed withholding 10 percent 
• Overseas investors investing in NIIF are not subject to indirect tax provisions of IT act 
• FDI process made transparent through investment in NIIF 
• Tax residence measures to be introduced in NIIF after making amendments to IT act, 1961 
• NIIF will make tax procedures simplified for overseas investors to make their investments and establish their companies in India 
• Tax policies are made consistent, clear and certain 
• NIIF funds will have parity with public market funds considering the tax policies 

Other Benefits

• NIIF is established to promote the “Make In India” flagship initiative of GOI to attract more FDI in a direct manner 
• NIIF will help in infrastructure development of India as a whole in a more transparent manner compared to the old FIPB route suffering from Red Tapism 
• NIIF is a measure towards good governance of India 
• Ease of doing business is enhanced through NIIF 
• Adoption of global best practices to increase transparency 
• Cooperation among the various regulators 
• Innovation of new business and investment practices 

Recent MoU’s made through NIIF

• India and UAE signed a MoU in March 2016 to mobilize long term investment into NIIF 
• This will allow transparent mechanism between investment institutions of UAE in Indian Infrastructure through NIIF 
• NIIF signed MoU with Russian investment firm RUSANO OJSC 
• The Russian MoU will help set up a high end technology private equity fund 
• The will enable joint implementation of investments into diverse projects in India 
• This will establish a joint working group to develop cooperation between India and Russia 
• NIIF will work on the development of the agreements signed in the MoU.