Infrastructure plays a key role in economic growth; it provides vital support to the productive sector and improves overall standard of an economy. Since infrastructure development requires huge investment, the proper financing system is required for effective implementation of these projects. This article provides a primer on various options available for infrastructure finance in India and issues pertaining to them.
A good investment climate is central to growth and poverty reduction. A vibrant private sector creates jobs, provides the goods and services needed to improve living standards, and contributes taxes necessary for public investment in health, education, and other services. But too often governments stunt the size of those contributions by creating unjustified risks, costs, and barriers to competition.
Finance Minister P Chidambaram in a press conference on October 6, 2005 announced a Special Purpose Vehicle (SPV) with the objective of disbursing about Rs. 10,000 cr for various projects this year. The main objective for SPV was to finance infrastructure projects. Apart from them, the finance minister also finalized a note on the procedure for public-private partnership in road projects. The initiative for setting up of an SPV had been proposed by the finance minister in the current fiscal budget. Clearly, the government has taken aggressive steps to meet the financing requirements of various infrastructure projects. The issue of finance is a key part for any infrastructure project. So what kind of financing instruments should be considered and who will be the major financier is a crucial question for any infrastructure project. This article provides a primer on various options available for project financing. |
