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.

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