World Bank to provide assistance for infrastructure funding facility
The Indian government recently approached the World Bank to establish a Global Infrastructure Facility (GIF) to assist with the financing investments amounting to approximately $1 trillion required for projects within the sector.
As per senior government officials, the World Bank has considered and is currently working on India’s proposal for a GIF which would provide financial assistance in the forms of loans to infra projects. The World Bank is working on this proposal as they too feel that the development of the sector is very important.
Establishment of the GIF:
The GIF would be established with the contributions provided from the World Bank, India, Sovereign Wealth Funds (SWFs) along with Pension Funds (PFs). Both the PFs and SWFs would be benefited by the facility, as they would receive higher returns by investing through GIF when compared against direct investment into projects. This move would also help in bridging the existing account gap, which in the fiscal of 2012-13 ascended to an all-time high of 4.8 per cent of GDP, applying additional pressure on the local currency.
Government’s Efforts:
A lot of effort is being made by the Indian government to develop infrastructure such as railways, roads and ports. In the five-year period ending March 2017, the estimated investment needed within the sector amounts to $1 trillion, almost half of which is expected to be contributed from the private sector.
In order to promote low-cost and long-term funding for the sector, the government has permitted Infrastructure Debt Funds (IDF) as a new category of financial intermediaries to refinance loans. Presently, there are six IDFs, out of which four are from NBFCs and two from the mutual fund space.
The government to fast-track infrastructure development established a Cabinet Committee on Investment. Since the first of January, the Committee has approved 209 projects worth Rs 3.84 lakh crore.
In fact Prime Minister Manmohan Singh announced in his Independence Day address that the government would be kick-starting new infrastructure projects, which would also include eight new airports along with two new sea-ports, within the coming months with objective of sustaining and improving the slumping economic growth.
With the growth of economy slumping to a decade low of five percent within 2012-13, the government has further opened the economy to foreign direct investment and now desires to use investments to return to a high-growth trajectory.
