How do we finance infrastructure?

After many estimations, here is another article by Economic Times which projects a total funds flow of USD 456 billion in the 11th plan. The article bases its projections on a recent assessment by Prime Minister’s Committee on Infrastructure (CoI) report.

In 10th plan the expenditure was about USD 170 bn. So it means nearly 4 times the expenditure is projected in 11th plan. The sector-wise allocation is as follows:

Sector                             10th plan (%)   11th plan (%)
Power                                               36.1         28.1
Roads                                               16.2         19.7
Railways                                          10.4        14.5
Telecom                                           11.5         12.4
Irrigation                                          14.6          9.8
Water Supply & Sanitation                   8.0          5.7
Ports                                                 0.4          4.7
Airports                                            0.5          2.2
Gas                                                     1.1          2.1
Storage                                              1.2          0.9
Total                                      100        100

I have read many of these reports which project how much finance India needs to improve its infrastructure in India. However, I have yet to come across a good report which tells how this finance is going to be raised? Where is it going to come from? Thin air?

It is infact an aspect of most of the reports we have in India. Somehow, the importance of financial system is ignored in quite a few reports made by Indian policymakers.

For instance, I was reading this report on Inclusive Growth by Planning Commission which does not talk about finance at all. (I do not understand the focus on inclusive growth as most of economic policies have been oriented towards the poor/rural/down-trodden etc section of population. I would write on this later.) How do we achieve inclusive growth without making finance available to those whom you want to include in the growth story.

Now, to the main story infrastructure financing. I have done some simple research and see the numbers just do not add up. I do not mean it cannot be achieved but perhaps the debate has to move more to means rather than ends. Ajay Shah points out that we need to increase financial innovation to make securitisation work.

The same has to be applied in other areas as well. Policymakers should realise that finance is critical in whatever we do and needs to be given its due.

Not all is that bad though. We have another committtee looking at financing infrastructure which as per the Terms of reference should have submitted the final report by 31st March, 2007.  Finance Minister does mention it in his budget speech this year as well (search for the word Deepak in the file) but after almost 2 months we still don’t have it in public domain.

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One Response to “How do we finance infrastructure?”

  1. Deepak Parekh Report on Infrastructure Financing « Mostly Economics Says:

    […] discussions in public domain, the report could not be found anywhere ( I make a note of the same here and here. I tried various govt. websites but could not locate the report. This was quite […]

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