Infrastructure financing in India: issues and options for sustenance of growth

Abstract

The subject was conceived during a period when India was in a high GDP growth phase (more than 9%). The initial idea was to examine ways and means to sustain such growth, since infrastructure was one of the major drivers of such growth. However, the situation altered significantly with the sub-prime crisis in the U.S and consequent ripple effect in the world economy, including a slow down in the growth of the Indian economy. Further, it was seen that during the high growth phase availability of credit was not a major issue. With the world wide economic turmoil availability of credit declined drastically, and whatever credit was available, was available under tough lending condition. This dissertation shifted it focus to look at the changing scenario in the infrastructure sector and the data suggests that while the ambitious target of the Government of India to fund the infrastructure sector in the 11th Plan to the tune of Rs. 20,56,150 crore (U.S dollar 514.04 Billion) is commendable, the slow down is an indicator that it may be difficult to realize such ambitious target and the "Business as usual" scenario projected by the Planning Commission estimating an investment of Rs. 15,52,657 crore (U.S. dollar 388.16 Billion) would probably be a more practical target. The dissertation also suggests a five-point strategy for provision of funds for the infrastructure sector, including the entry of the Government in the debt market to garner funds for infrastructure investments, divert resources from anti-poverty programmes to specific infrastructure sectors with large anti poverty connotations and raise the minimum limits of investment in infrastructure sector by the insurance companies.