Dissertation Writing Help on
Funding the Infrastructure Investment Gap
The
Government of India realizes the importance of accelerating the investments in
infrastructure to boost the country’s slowing economy. Therefore, it has set a
massive target for doubling investment in infrastructure from Rs. 27 lakh
crores (eleventh plan – 2011/12 prices) to Rs 51 lakh crores during the twelfth
plan period, i.e., 2012–2017.The share of infrastructure investment in GDP is
panned to be increased to more than 10% by the end of the twelfth plan. This
investment, if it materializes, can propel India’s economic growth to a higher
trajectory.
It
was not so long ago that infrastructure investment in India was financed almost
entirely by the public sector—from government budgetary allocations and
internal resources of public sector infrastructure companies. However lately,
the private sector has emerged as a significant player in bringing in
investment and building and operating infrastructure assets from roads to ports
and airports and to network industries such as telecom and power. Private
investment now constitutes almost 40% per cent of infrastructure investment. In
these times of tight fiscal environment, private sector will need to play a
greater role without which infrastructure development will not meet the growing
demand and could fall far behind the requirements.
The
pace of growth envisaged at 9 percent by planning commission can be achieved
only if the infrastructure deficit is overcome and adequate investments are
made. It is critical to bridge the gap between planned infrastructure spend and
delivery.
Infrastructure
investment in eleventh plan: Overview
In
eleventh plan, a total investment of Rs. 27 lakh crores (eleventh plan –
2011/12 prices) was made towards infrastructure development. This investment at
7.22 percent of GDP (average) represents a significant shift from 5.02 percent
of GDP (average) invested during tenth plan.
This
sharp increase in total infrastructure investment was largely due to the rapid
rise in investment by the private sector especially in power and
telecommunications. (70% of the private sector investment was made in power and
Telecommunications.)
Banks
There
has been a rapid growth in bank credit to infrastructure projects with banks contributing
to the tune of 21% of the total investment during first 3 years of 11th five year
plan.1 Most of this funding has been provided by Public Sector banks and in
some cases the sectoral prudential caps have almost been reached (especially
for power sector) thus constraining any further lending to these sectors. Banks
have prudential exposure caps for infrastructure sector lending as a whole as
well as for individual sectors.
2380 2953 3534
Sources of private funding:
Life
insurance Companies
Life
insurance companies are required to invest at least 15% of their Life Fund in
infrastructure and housing. Investment by insurance companies in 2012 has only been
10% of insurance life fund AUM which indicates further potential to utilize
insurance companies to fund infrastructure development. Moreover insurance penetration
is estimated to continue to rise, with the insurance premium expected to grow
from the current approximate 4% of GDP to 6.4% of GDP by the end of the twelfth
plan. This will generate further potential for infrastructure funding however
it will be subject to management of prudential and regulatory constraints in the
sector.
External
commercial borrowings (ECB's)
The
share of ECB in total infrastructure investments has been recording a decline.
This could be a reflection of the way regulatory environment is viewed by the international
investors. They are not keen on making long term investments in environments
which have regulatory idiosyncrasies. Under-developed financial markets/products
may have also contributed to this drop in ECB funding.
Equity
A
large part of equity investments relies on foreign investments with domestic
investment institutions not showing significant interest in taking equity in Infrastructure
projects. The equity investment for the twelfth plan period is estimated to be
Rs 4.56 lakh crores.
If you want MBA Writing Help in
Infrastructure Topics, PhD Management Dissertation Topics, than contact
Research Papers Expert Writers. Also
read Dissertation on Financingof PPP Infrastructure Projects in India.
