The infrastructure is considered as a key determinant of the economic development of a nation. In this context, highlight the issues faced in infrastructure financing in India.
Infrastructure is the key to quality of public life and level of economic activity in a nation.
Characteristics (National statistical Commission):
- Public good
- High externality
- Non tradability of output
- High sunk cost
Key determinant of economic development:
- Pillar of every sector.
- Storage, transport, marketing are core of the sector.
- Agriculture infrastructure fund of 1 lakh crore created recently.
- Key to reducing logistic cost (approx 14% of GDP).
- Service sector
- Crucial to promote sectoral expertise in technology such as telecom.
Determines market efficiencies:
- E.g. Poor mechanization (less than 40%) and inadequate supply chain management are the primary causes of poor sectoral growth in agriculture.
- Food processing industry – absence of cold storage facilities, etc.
- Multiplier effect
- Promote employment, quality of public life, blue economy.
- E.g. Bharatmala Pariyojana, National infrastructure pipeline.
- Low financing options – over 50% dominated by Banks/ NBFC.
- Low private sector participation.
- Absence of robust bond market.
- High risk areas, high sunk cost and scale of investment.
- Poor and non uniform risk sharing framework.
- Focus on Bond markets such as Municipal bonds.
- Tools like monetization (National monetization plans are steps in right direction).
- National infrastructure pipeline proper utilisation.
Infrastructure holds the key to unlocking unbound potential of dynamic economy like India and reaching goal of $5 trillion economy.
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