In less than ten days, the government is expected to announce a fresh set of measures to boost investment in infrastructure to rejuvenate a slowdown-hit broader economy. The steps could kickstart about Rs. 50,000 crore-worth projects, government sources said.
The key issue is revival of capital and credit for stalled infrastructure projects which are substantially powered by loans. There have also been calls to give infrastructure projects the status of “priority sector” to enable more loans from commercial banks.
The Planning Commission had prepared a note on channelling more funds to infrastructure through IIFCL (India Infrastructure Finance Company Ltd), which would form the basis of the fiscal stimulus. The note figured in a meeting on the aftermath of the global financial crisis chaired by Prime Minister Manmohan Singh on Monday.
As the note requires more study, Chidambaram said both the Reserve Bank of India (RBI) and the department of financial services within the finance ministry would further examine the proposal. Among the measures considered by the government include opening of the external commercial borrowing (ECB) window to meet their refinance requirements.
A delegation of top executives representing non-banking financial firms that primarily finance core sector projects met finance minister P.Chidambaram recently seeking a set of measures to tide over the crisis.
Infrastructure companies have been hemmed by a hard domestic interest rate regime after Reserve Bank of India (RBI) maintained raised key rates to suck out liquidity to tame a runaway inflation rate that hovered above a worrisome 12 per cent for several weeks before beginning to decline. Now it is back in single digits.
The government has recently raised overseas borrowing limits under which infrastructure companies can borrow up to $500 million in a year from overseas markets for spending in India.
A top executive at an infrastructure developing company, however, said the measures might have come too late.
“The overseas borrowing costs have increased significantly in the last few months. Besides, funds availability in international banks has now become an issue that cannot be addressed,” he said.