Government funds and the corporate bond market may not finance infrastructure projects


The more than 7,000 infrastructure projects in the National Infrastructure Pipeline cannot be financed by government funds alone, nor is the corporate bond market mature enough to provide adequate financing for so many. long-term projects, said Finance Minister Nirmala Sitharaman in Lok Sabha. , earlier this week.

Recently, both houses of the Indian parliament passed the National Bank for Infrastructure and Development Finance Act (NaBFID) which will establish a Development Finance Institution (DFI) that will ensure a constant flow of funds for development projects. infrastructure in India at a lower rate.

The new institution will support the development of long-term, non-recourse infrastructure finance in India, including the development of the bond and derivative markets necessary for infrastructure finance and the exercise of infrastructure finance business.

“The national infrastructure pipeline that was announced in December 2019 has more than 6,500 projects and all are operating at an estimated cost of ??111 lakh crore. This is the kind of money required for infra financing of India and public funding from taxpayer money cannot fund this kind of requirement. If we only depend on taxpayers’ money and public funds, it could take 100 years, ”Sitharaman said.

The government had allocated ??20,000 crore in the FY22 budget to capitalize the institution and expect it to create a loan portfolio of at least ??5,000 billion in about three years. As part of the National Infrastructure Pipeline, the Union government plans to invest ??111 trillion from 7,671 infrastructure projects over the next four years to 2024.

The government led by Narendra Modi, in the finance budget, decided to increase spending on infrastructure projects in fiscal year 22. Central government capital spending is expected to affect ??$ 5.54 trillion for the next fiscal year, when it is expected to close at ??4,400 billion in the current one, according to the budget announcements.

“In India, the corporate bond market is not mature, it is not deep enough. So we are not in a position to say that the bond market can support our financing needs for long term projects, ”she added. “So through setting up this organization, we believe that the PIN and the type of funding required for it, this DFI will reach around 8-10% of what is expected. This institution is quite unique because it meets development and financial objectives. “

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