Funding bottleneck slows infrastructure development in India

What are the main issues when it comes to infrastructure in India? Infrastructure is the lifeline of any economy, and economic development is essentially a function of availability of adequate and appropriate infrastructure. Transport and logistics – be it railways, including metro rail, roads or ports – are classic examples. While efforts are on to […]

What are the main issues when it comes to infrastructure in India?

Infrastructure is the lifeline of any economy, and economic development is essentially a function of availability of adequate and appropriate infrastructure. Transport and logistics – be it railways, including metro rail, roads or ports – are classic examples. While efforts are on to address these aspects, there is still a long way to go. It is therefore important to focus on areas such as these, since they ultimately are responsible for capacity constraints that have a direct bearing on the overall economic activity domestically and externally. Another area requiring urgent attention is urban infrastructure.

What needs to be done to improve India’s infrastructure and how urgent is this?

Addressing the funding bottlenecks is fundamentally important to ensure that infrastructure growth achieves its full potential. It is important that innovative financing channels are successfully operationalised to bridge the infrastructure financing gap. There are a number of other factors attendant to infrastructure projects that make implementation a challenge – by their very nature, these are long gestation-period projects and problems range from land acquisition to environmental clearances. It is however important that these issues are effectively addressed sooner rather than later. The reason this becomes critical is the cascading effect that it has on various other aspects of the economy. For example, an underdeveloped rail and road network adversely affects producers and consumers because of inefficiencies in movement of produce.

Are steps being taken to address the infrastructure problems?

A number of steps are being taken to address various issues that have held back the economy in achieving its full potential. Not surprisingly, therefore, a vast majority of these initiatives revolve around making adequate financing available for infrastructure. Creation of the National Investment and Infrastructure Fund (NIIF) in December last year and approval from the Securities Exchange Board of India to the NIIF as an alternative investment fund is one such step. It is proposed that the NIIF will pool in 40,000 crore rupees (Dh21.9 billion), with half coming in from the government. This money will be used for funding commercially viable greenfield and brownfield projects, including some stalled infrastructure projects.

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Source: Business

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