Give an account of the hurdles faced in financing of infrastructure in India. Also mention the steps taken by the government to resolve them.

Indian needs about $1.5 trillion investment in infrastructure to become a $5 trillion economy by 2025.

Issues faced in infrastructure financing:

• Fiscal constraints (FRBM).
• Unavailability of funds.
• Huge debt.
• Banks can’t invest in long term projects.
• Policy reforms still stagnant.
• Corporate bond market is underdeveloped.
• Limited scope of investment from mutual funds and debt funds.

Steps taken by government in this regard:

• National infrastructure pipeline of Rs. 102 lakh crore launched.
• Indian infrastructure Finance Company Limited formed.
• PPP models explode in various highways, airports, ports, etc.
• Infrastructure debt funds promoted.
• 5/25 scheme launched to facilitate bank’s investment in infrastructure by enabling the banks to provide for longer repayment period for infrastructure projects.
• Foreign investors allowed to invest in various sectors (liberalisation of FDI).
• Investment and infrastructure fund operationalised as fund of funds.

Infrastructure in social and economic spheres is critical to India’s sustainable growth. Hence, there is a need for more push to private sector and retail investors to tap the unused funds for infrastructure development.

Topics: GS-III: Indian Economy Issues Relating to Planning • GS-III: Mobilization of Resources • GS-III: Economic Growth Development