The importance of infrastructure for sustained economic development and influencing the living standards is well recognized. Yet millions of people across the world, lack access to drinking water, proper sanitation, electricity and communication network. High transaction costs arising from inadequate and inefficient infrastructure prevent the economies from realizing their full growth potential.
In the Indian context, while there has been some progress in attracting investment into infrastructure, the total annual capital investment on infrastructure still hovers around 4 percent of GDP, as compared to over 10 percent share in some other Asian countries. The dynamics of the Indian economy warrant a strong push to infrastructure. Hon’ble Finance Minister of India, while presenting the Union Budget for FY 2006, acknowledged the need and significance of building adequate infrastructure in the country and made the following announcement
“The importance of infrastructure for rapid economic development cannot be overstated. The most glaring deficit in India is the infrastructure deficit Investment in infrastructure will continue to be funded through the Budget. However, there are many infrastructure projects that are financially viable but, in the current situation, face difficulties in raising resources. I propose that such projects may be funded through a financial Special Purpose Vehicle……. The SPV will lend funds, especially debt of longer-term maturity, directly to the eligible projects to supplement other loans from banks and financial institutions. Government will communicate the borrowing limit to the SPV the beginning of each fiscal year.” |
