DIPP seeks debate on financing requirements of infrastructure and industry

31 Oct 2011 Evaluate

The Department of Industrial Policy and Promotion (DIPP) under the commerce and industry ministry has floated a discussion paper on the 'Financing requirements of infrastructure and industry' to start a debate on the issue. In the 12th Five Year plan, the government is planning to invest around $1 trillion for infrastructure development.

As per the discussion paper, to achieve 9-10% economic growth, the manufacturing sector needs to grow by 13-14% every year, this make a case for the need to attract global investors for building world class infrastructure.

'The infrastructure finance market in India is characterized by the absence of an active long-term corporate debt market, asymmetric information on infrastructure projects, and inherent risks in financing infrastructure projects,' the discussion paper noted.

The conversion of development finance institutions (DFIs) into commercial banks has increased the problem of banks as commercial banks are facing the problem of liability mismatch in financing infrastructure projects. The DFIs are one of the major sources of the long term finance.

However, investment in infrastructure has increased from 5% of the gross domestic product (GDP) in 2001-07 to 8% of GDP presently. Still India is far behind from developing countries like, China and Thailand on basic infrastructure parameters of roads paved in and number of telephone lines per 100 people etc.

As per the DIPP official, 'Given the stage of development our country is right now we need to ensure smooth investments routes into infrastructure and analyze the various sources and channels available for inflows of funds.' The DIPP also has asked public comments on the challenges faced by domestic insurance and pension funds in context of asset liability mismatch.