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We need funds. But from where?
Infrastructure funding in India has been mainly through banks and financial institutions. But as a result of the credit crisis and the high interest regime, investments in infrastructure (which tends to have a longer-term focus than corporate capacity expansion) have dried up.
In these dry times therefore, it becomes imperative to understand that this sector can really play a counter-cyclical role and support economic growth. Today, the Indian government desperately needs capital for its infrastructural projects. With Indian forex reserves surging to over $290 billion, the government is looking for ways to use them for infrastructure development (as per estimates, India will require around $492 billion over the next five years). The India infrastructure finance company (IIFCL) has already offered assistance worth Rs.10,000 crore, but this amount alone will not be suficient. India could also encourage oil rich west Asian countries (where wealth funds have a corpus of over $1,500 billion) to invest in infrastructure projects. Another route is private capital. As more private capital flows into infrastructure, more public-private-partnerships (to build & operate infrastructure) will be formed, which is definitely good news for overall economic growth.
So what will we really do to build a world-class infrastructure? A country like India needs stable long-term funding for infrastructure, for without it, we’d still be living in the dark ages!
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