Evolution of Financing Needs in Indian Infrastructure

Posted | on May 11, 2012 | by Gopakumar | Comments Off by Pankaj Sinha; Deepshika Arya and Shuchi Singh MPRA Paper No.38741, April 2012 India has emerged as one of the fastest growing economies even in the difficult financial downturn era. In coming years, India will be demanding a large number of infrastructure services to match the demand and keep an upward sloping growth curve. Indian infrastructure including both soft (port services, air and telecom) and hard (road, railways and airways) infrastructure is growing at a fast pace at present. The country also has largest road network (3.34 million km) and second largest rail network of the world. Requirement for investment in infrastructure projects was expected to increase by 145.6% from Five Year Plan 2002-07 to FYP 2007-11. Part of the investment is expected to come from the various resources as public private partnerships and public investments. Indian government is also trying to experiment with different tools of PPP (public private partnerships) financing such as VGF (viability gap financing), SPV (special purpose vehicle) to decrease the deficits on the accounts of infrastructure.This paper studies the evolution of financing needs and consequential innovative methodologies in Indian infrastructure. Government has made various efforts to match the growth in infrastructure with countrys economy growth. However, Indian infrastructure is still lagging behind globally. This study analyzes existing frameworks available for financing and risk involved in them. India has lot of opportunity to grow using public private partnership model, but still the numbers of project financed are very less. We also have studied project financing model and capital financing model which are used by various competitive countries to India.