World Bank: Financing India’s Infrastructure Needs Report

The report titled “Financing India’s Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action” was released recently by the World Bank.

What are the key findings of the report?

  • To keep pace with the growing requirements of the urban population, India needs to increase its annual investment in city infrastructure from an average of 10.6 billion USD per annum in the past decade to an average of 55 billion USD per annum in the next 15 years.
  • India is expected to require some 840 billion USD over the next 15 years.
  • The report predicts that over 600 million people will live in Indian cities by 2036. This accounts for 40 per cent of the total population.
  • The rapid shift to urban regions will cause additional stress on the already stretched urban infrastructure and services in Indian cities.
  • The will be a surge in demand for clean drinking water, reliable power supply, efficient and safe road transport, and other vital services.
  • About 50 per cent of the fund requirements (450 billion USD) in the next 15 years is for the basic municipal services sector that includes water supply, sewerage, solid waste management, roads, and streetlights. The rest of the funding is required for providing urban transportation services.
  • Presently, central and state governments provide 75 per cent of the urban infrastructure funding. The urban local bodies (UPB) provide just 15 per cent of the funds through surplus revenues. Only 5 per cent of urban infrastructure investments come from the private sector.
  • Low charges for municipal services and a weak regulatory framework are reducing viability and attractiveness of  urban infrastructure projects for investors.
  • Between 2011 and 2018, urban property tax was just 0.15 per cent of the GDP when compared to an average of 0.3-0.6% of GDP for low and middle-income countries.
  • The report recommends various measures at the central, state and local levels to remove frictions in attracting private investments for urban infrastructure. The report, through these recommendations, seeks to increase private commercial finance to solve the urban investment challenges faced by India.

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