About two years ago, Brad DeLong mused about outsourcing to India:
So what will the U.S.’s comparative advantage be? And how will it use that comparative advantage as a base to keep upgrading the productivity of America’s workers?
To which I thought I had an answer:
The answer to the last question, I think, is rather obvious: capital goods. India needs a massive infrastucture upgrade almost in every area imaginable: from water and electricity to air traffic (except, perhaps, telecommunications, where India has made enormous strides in recent years). Add to it a badly undercapitalized agriculture, and the picture is complete.
Well, this just in:
U.S. Ex-Im OKs $2.2B Indian Facility
Apr-21-2008 | Source: Trade Finance
U.S. Ex-Im has approved a $2.2 billion Indian Infrastructure Facility that will support U.S. exports to Indian projects in sectors such as power and renewable energy generation, oil and gas development, small aircraft, airport development and health care.
Under the facility, eight Indian financial institutions provide their guarantees to expedite processing of U.S. Ex-Im-backed medium-term and long-term financing for Indian buyers of U.S. exports. Each financial institution has an underlying pre-approved credit line of $50 to $250 million, and one lender, Power Finance Co., has a pre-approved line of $800 million. Financing provided under the facility is denominated in U.S. dollars.
The Indian financial institutions participating in the facility are Power Finance Co. (PFC), Infrastructure Development Finance Corp. (IDFC), Industrial Development Bank of India (IDBI), India Infrastructure Finance Co. Ltd. (IIFCL), State Bank of India (SBI), Infrastructure Leasing & Financial Services (IL & FS), India Renewable Energy Development Agency (IREDA) and Punjab National Bank.
“There is a rising demand for U.S. goods and services in India because of their high quality and competitive prices,” says U.S. Ex-Im chairman and president James Lambright. “This new facility will help Ex-Im Bank to work with major Indian lenders to provide dollar-denominated financing for U.S. exports to India’s current and future infrastructure projects.”
India’s Ministry of Finance has estimated that more than $500 billion will be needed to finance development of India’s infrastructure. To facilitate financing for U.S. exports for Indian projects, Ex-Im Bank has been working to establish partnerships with business, government and financial institutions in India. In October 2007, U.S. Ex-Im chairman Lambright participated with U.S. Treasury Secretary Henry Paulson in the U.S.-India CEO Forum Infrastructure Investment Conference in Mumbai. Last month, U.S. Ex-Im board member Diane Farrell and staff conducted business development meetings, focusing on small and medium-sized enterprises, with officials in Hyderbad, Pune, Mumbai and New Dehli.
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Capital goods indeed…