India needs to invest at least 8-10 percent of its Gross Domestic Product in infrastructure to sustain a high single-digit growth rate over the next couple of decades. As the country aims to double its infrastructure spending to Rs 142 trillion by 2030, active participation from the private sector will also be essential, according to M. Nagaraju, Secretary of the Department of Financial Services.
For the past two decades, infrastructure capital expenditure has come solely from the government, as the private sector had built more than adequate capacity during the boom years of the early 2000s. However, the economy has not reached its potential growth since then.
This has forced the government to do the heavy lifting when it comes to infrastructure spending.
Addressing a seminar organised by the developmental lender, the National Bank for Financing Infrastructure and Development (Nabfid), in Mumbai on Thursday, the Financial Services Secretary said; “...achieving high single digit growth in the next two decades will require more than just budgetary outlays, and therefore the private money has to flow in."
“So far, three-fourths of infrastructure spending is borne by the government. This must change, and there should be greater participation by the private sector. For whatever is required to invest, the government is ready to build that ecosystem as we seek to double the infra capex to Rs 142 trillion by 2030,” Nagaraju added.
He said the government has made significant efforts to make infrastructure a safer asset class, made changes in concession agreements, created stronger counterparties, and set up institutional arrangements like the Insolvency and Bankruptcy Code (IBC).
The government has supported the setting up of the National Asset Reconstruction Company and specialised development financial institutions like Nabfid. These efforts are supported by other initiatives like multi-modal connectivity for the movement of goods and people, and the national monetisation plan, which seeks to unlock the value of older assets for new asset creation, he said.
There is also a scheme for states providing long-term interest-free loans for creating durable assets, he added.