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| IIFCL may lend $500-mn reserves |
| Bloomberg / Mumbai Mar 03, 2010, 00:09 IST |
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India Infrastructure Finance Co Ltd (IIFCL), a state-run entity that extends loans at preferential rates, may use $500 million (around Rs 2,302 crore) of the nation’s foreign-exchange reserves next financial year to build roads, ports and power plants.
The agency, set up four years ago, will eventually draw up to $5 billion (Rs 23,020 crore) from the reserves, which are managed by the Reserve Bank of India and have reached $279 billion (Rs 12.85 lakh crore), chairman S S Kohli said in an interview last week in New Delhi. The holdings, the world’s seventh largest, are enough to pay for nine to 11 months of imports, according to HSBC Holdings. “The reserves are way above what would be considered adequate and a significant amount can be safely drawn down and spent,” said Robert Prior-Wandesforde, a Singapore-based economist at HSBC, Europe’s biggest bank. “It’s a very small step but it is impossible to close India’s massive infrastructure deficit by conventional means.”
The government is using foreign-currency holdings to spur economic growth after the funds almost doubled in the past four years. The country was forced to turn to the International Monetary Fund for aid in 1991 after Iraq’s invasion of Kuwait pushed up fuel import costs, causing reserves to dwindle to the equivalent of two weeks’ imports.
India Infrastructure plans to raise $1 billion (around Rs 4,600 crore) selling 10- year medium-term notes overseas in the next two years. The agency has disbursed Rs 7,500 crore ($1.6 billion) of funds in the year ending March 31 and plans to boost lending to about Rs 22,000 next financial year, Kohli said. That’s dwarfed by the $500 billion the government says is needed to build infrastructure in the five years through March 2012. The inadequacy of the nation’s utilities and transport network shaves 2 percentage points from economic growth, the finance ministry estimates. The government said in last month’s budget it will boost infrastructure spending by 24 per cent to Rs 2.67 lakh crore in the coming financial year, when gross domestic product is forecast to climb 8.2 per cent.
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