The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today gave its approval for the proposal to permit utilization of India's capital contribution to the SAARC Development Fund (SDF) for its Economic and Infrastructure Windows, in addition to the existing approval for utilizing India's capital contribution for the Social Window of SDF.

The approval will help in promoting projects such as cross border infrastructure. Such projects will help improve intra-SAARC trade and growth potential of the SAARC region, and also in promoting financial inclusion and social security to disadvantaged/vulnerable sections of society in the region. There are no additional financial implications for India, as it only entails a restructuring of India's capital contribution to the SDF.

Background:

The SDF was set up in 2008 to improve the livelihood of the people and to accelerate economic growth, social progress and poverty alleviation in the region. The SDF Charter provides for utilization of the Fund, for projects in three windows:

(i) Social Window;
(ii) Economic Window;
(iii) Infrastructure Window.

At the 18th SAARC Summit held in November 2014 in Kalhmandu, leaders agreed to operationalize the SDF's Economic Window and Infrastructure Window at the earliest, for effective implementation of regional and sub-regional projects. In light of the pressing need to address infrastructure bottlenecks for improved growth of the SAARC region, it is pertinent to use India's capital contribution to SDF for its Economic and Infrastructure Windows in addition to the Social Window.

Utilization of capital contribution to enable SDF Economic and Infrastructure financing for cross border regional projects. Proposal permits the utilization of India's capital contribution to the SAARC Development Fund for the Fund's Economic and Infrastructure Windows in addition to the Social Window, by restructuring India's existing contribution without additional financial implications, thereby enabling financing of cross border infrastructure and regional projects to promote intra regional trade, growth, financial inclusion and social security for vulnerable populations.