Infrastructure needs to be bankable: Chidambaram

The minister says weakness in policy and regulatory framework is an obstacle in infrastructure growth, reports Gaurav Choudhury.

Finance Minister P Chidambaram on Monday identified the lack of credible and bankable infrastructure projects, and the absence of long-term financing instruments as the major weaknesses affecting the growth of the infrastructure sector in the country.

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The minister also said that international and Indian finance companies were joining hands to launch dedicated infrastructure debt and equity funds.

"I expect to see the measures towards setting up of dedicated debt-equity instruments bearing fruits in the next few weeks," Chidamabaram told a World Bank seminar on infrastructure.

"There are a few constraints (for the growth of the infrastructure sector). These include weakness in policy and regulatory framework, lack of credible and bankable projects, absence of long-term equity and debt financing for infrastructure and lack of capacity among public institutions to manage public-private-partnership (PPP) projects," he said.

The finance minister said that the government was "aware of these constraints and some steps have already been taken".

Officials say India would be requiring about $320 billion over the next five years for infrastructure development.

Chidambaram said that a "significant" part of this would have to come from the private sector. "India’s investment needs are enormous, aspirations are high and opportunities are also very attractive," said the minister.

While the savings rate has increased to more than 30 per cent, Chidambaram said it was possible to increase the savings rate further. The Gross Domestic Savings (GDS) accounted for 32.4 per cent of the gross domestic product (GDP) in 2005-06.

E-mail Gaurav Choudhury: gaurav.choudhury@hindustantimes.com