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Subject: Investment Funds

  • Investment Friendliness Index (IFI)

    Why in News?

    NITI Aayog launched the Investment Friendliness Index (IFI) to assess and improve the investment ecosystem across States and UTs through competitive and cooperative federalism.

    What is IFI?

    • A data driven index that benchmarks how effectively States and UTs attract and sustain investments by evaluating their policy, regulatory, institutional, and infrastructure ecosystem.

    Background

    • Proposed after the 9th NITI Aayog Governing Council Meeting (2024).
    • Announced in the Union Budget 2025-26.

    Key Features

    • Covers 28 States and 8 UTs.
    • Based on 84 indicators using: Secondary data and Investor perception survey.

    Eight Pillars

    • Infrastructure. Business Climate, Resources, Government Policy, Regulatory Ease, Institutional Environment, Financial Health, and Environmental Resilience

    Performance Categories

    • Top Performers: Above 50
    • Frontrunners: 45 to 50
    • Emerging Performers: 40 to <45
    • Aspiring States: Below 40

    Top Performers

    • Overall: Gujarat, Maharashtra, Tamil Nadu, Goa, Odisha.
    • Hilly & NE States: Uttarakhand.
    • UTs & City States: Goa.

    Significance

    • Promotes competitive and cooperative federalism.
    • Encourages State level reforms and ease of investment.
    • Supports Viksit Bharat @2047 and Viksit Rajya @2047.

    [2019] Which one of the following is not a sub-index of the World Bank’s ‘Ease of Doing Business Index’?

    [A] Maintenance of law and order

    [B] Paying taxes

    [C] Registering property

    [D] Dealing with construction permits

  • Explain the meaning of investment in an economy in terms of capital formation. Discuss the factors to be considered while designing a concession agreement between a public entity and a private entity.

    Investment refers to the creation or addition of capital assets in an economy that enhance its productive capacity. It involves machinery, infrastructure, technology, and human skills.

    Meaning of Investment in Terms of Capital Formation

    Addition to Capital Stock- Eg- Samruddhi Expressway, Foxconn Plant in Chennai.

    Gross Capital Formation (GCF)- additions to fixed assets, inventories, valuables. Eg- Solar Plant in Rajasthan.

    Enhances Productive Capacity- Eg- Dedicated Freight Corridors boosting logistics efficiency.

    Savings and Investment Link- Higher savings enable greater capital formation. Eg- Sovereign Green Bonds funding renewable energy assets.

    Includes Physical, Human and Social Capital- Eg- Skill India Mission, Metro rail projects.

    Creates jobs, improves productivity, accelerates growth. Eg- Sagarmala driving port-led industrialisation.

    Factors to Consider While Designing a Concession Agreement (Public-Private)

    Political / Policy

    Clear Scope Definition- project components, performance standards, service quality benchmarks, and asset ownership.

    Model of partnership – Eg- Hybrid annuity model or BOT Model

    Concession Period based on asset life, investment size, and recovery period. Eg- 20-30 years for highways.

    Economic

    Risk Allocation between government and private entity

    Revenue Model- Eg- tariffs, user charges, annuity payments, or viability gap funding.

    Financial Structure- Terms on capital investment, debt-equity ratio, refinancing rules.

    Social

    Environmental & Social Safeguards- Compliance with EIA and land acquisition laws.

    Transparency and Accountability- Public disclosures, third-party audits, and periodic review.

    Technological

    Performance Metrics- KPIs, service standards, monitoring, penalties, incentives.

    Legal

    Dispute Resolution- arbitration method.

    Renegotiation Rules- framework for handling unforeseen demand or cost shocks.

    Termination Clauses- rules for default, compensation, and asset handback.

    Kelkar Committee recommendations

    Prioritizing service delivery over fiscal benefits in contracts

    Establishing independent sector regulators

    Better risk allocation between stakeholders

    Utilizing advanced risk management techniques

    A well-designed concession agreement ensures efficient public-private collaboration, ultimately leading to sustainable high-quality infrastructure delivery and realisation of a $40 Trillion economy by 2047.

  • Consider the following statements

    Consider the following statements :
    Statement-I :
    Interest income from the deposits in Infrastructure Investment Trusts(InvITs) distributed to their investors is exempted from tax, but the dividend is taxable.
    Statement-II :
    InvITs are recognized as borrowers under the ‘Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’.
    Which one of the following is correct in respect of the above statements?

  • With reference to the National Investment Fund to which the disinvestment proceeds are routed, consider the following statements

    With reference to the National Investment Fund to which the disinvestment proceeds are routed, consider the following statements:
    1. The assets in the National Investment Fund are managed by the Union Ministry of Finance
    2. The national investment fund is to be maintained within the Consolidated Fund of India
    3. Certain Asset Management companies are appointed as the fund managers
    4. A certain proportion of annual income is used for financing select social sectors
    Which of the statements given above is/are correct?

  • With reference to ‘National Investment and Infrastructure Fund’, which of the following statements is/are correct

    With reference to ‘National Investment and Infrastructure Fund’, which of the following statements is/are correct?

    1. It is an organ of NITI Aayog.
    2. It has a corpus of Rs. 4,00,000 crore at present.

    Select the correct answer using the code given below :

  • Consider the investments in the following assets

    Consider the investments in the following assets:
    1. Brand recognition
    2. Inventory
    3. Intellectual property
    4. Mailing list of clients
    How many of the above are considered intangible investments?

  • With reference to investments, consider the following

    With reference to investments, consider the following:
    I. Bonds
    II. Hedge Funds
    III. Stocks
    IV. Venture Capital
    How many of the above are treated as Alternative Investment Funds?