International Finance Corporation (IFC) urges India to simplify its regulatory policies for Infra investment
The International Finance Corporation (IFC), the private sector financing arm of the World Bank has opined that India should simplify its complex regulatory policy with regards to inviting investments for infrastructure projects. This will enable it to rely more on domestic investors for investing in major infrastructure projects instead of banking on foreign capital to fund such projects.
Simplifying regulatory framework essential:
In view of the economic slowdown that has engulfed the Indian economy, it is high time that the government did some serious soul-searching with regards to tiding over this difficult phase. This viewpoint was put forward by the CEO of IFC while stating that India is making the right moves with regards to emphasising on developing its infrastructure. However, he felt that it needs to simplify its regulatory framework regarding inviting investments in infrastructure development.
Interest evinced by global investors:
Considerable interest was evinced by global investors to invest in infrastructure projects in India. The success of the offshore rupee bonds worth US$160 million that the IFC had earlier issued had gone a long way in convincing them about the viability of investing in India. Besides, a strong subscription interest was evinced from investors in response to the launch of the rupee-linked bonds for investing in India.
Crucial for India to develop its capital markets:
It is imperative that India chalks out a clear-cut path forward with regards to funding its trillion-dollar infrastructure development agenda. Considering that inexpensive global capital inflows may dry up anytime in the future, it is crucial that India develops its capital markets while focusing on local savings. It is also essential to garner local capital so as to reduce the financial risk that might be encountered.
Global funds available, but risks involved:
With India looking to develop its infrastructure to achieve global standards, it was presented with immense opportunities in the form of large sums of global liquid funds as well as inexpensive capital inflows. However, there was an element of risk involved in seeking global funds to source its infrastructure projects. Speculation related to the US Federal Reserve’s tapering strategy has had an adverse impact on many emerging markets in recent times, which India needs to be cautious about.
Long-term foreign debt to be used prudently:
Availability of inexpensive foreign capital can at times be counter-productive. This is due to a pseudo belief that there will not be scarcity of such funds in future. However, it also calls for some stringent measures that the government needs to adopt. This includes bringing about economic reforms as well as developing local capital markets. Long-term foreign debt can act as a financial burden on the country if it is not employed prudently. Hence, it is imperative that India employs a prudent approach towards building up funds for its infrastructure development.
