Relaxing external borrowing norms and creation of an active bond market are some of the measures the government should take to realise the dream of “trillion-dollar infrastructure spend” during the twelfth Plan period beginning March 2012, according to a study.
“An active bond market can attract investors and provide the much-needed long-term funds to infrastructure developers,” said the study, undertaken jointly by Federation of Indian Chambers of Commerce and Industry and McKinsey. The targeted infrastructure spending would require broad set of regulatory measures and sufficient liquidity, it added.
The study also said that relaxing the guidelines on external commercial borrowings guidelines could provide an additional source of funding for infrastructure projects as regulatory constraints often impede their funding. It also recommended according priority sector status to infrastructure as 40 per cent of bank loans are allocated to priority sectors like agriculture.
Expenditure on infrastructure projects in India grew from 5 per cent of the gross domestic product to 8.9 per cent during the current Plan period. The 12th Plan aims at a planned infrastructure spending of around $1,000 billion — roughly 11 per cent of the GDP.
Among the major reasons for the delays in infrastructure projects identified by the report are sub-optimal spend allocation, land acquisition issues, shortage of manpower and limited risk-mitigating mechanisms at the project financing stage.
