Debt Market Vital For Infrastructure

The establishment of a good debt market is essential to help India build up its infrastructure which has begun to cramp economic reforms, the chief of construction and engineering giant Larsen and Toubro (L&T) said on Tuesday.

Something that is really required for infrastructure development is a good debt market which doesnt exist in India, Sudhakar Kulkarni, managing director of L&T, told Reuters in an interview.

There are no institutional investors in the debt market like insurance companies or pension funds. Overseas, these are the institutions that really invest in infrastructure projects, or there are infrastructure funds, mutual funds which are floated specifically for investment in infrastructure area.

 

But in India, such funds were not available to finance long-term projects, Kulkarni said.

We have to open that up, he added. Not that it is going to make a big difference immediately because the funds are limited, but I think a beginning has to be made there.

Indias infrastructure sector is likely to require annual investments of $30 billion or more by the year 2000, experts estimate.

Kulkarni said he expected only a little of this money to come in from foreign investors.

A debt market is a prerequisite really for this. All said and done, not more than perhaps 30-40 percent of the funds can come from overseas sources, he said.

Ultimately a substantial amount would have to come from Indian sources. But when you go in for very large projects, the financial institutions themselves would not like to commit very large amounts.

So the capital market, the debt market has to be developed if we really want to get these projects, Kulkarni added.