Infra will Make India a Developed Country

But significant challenges still exist and need to be overcome

- BY S.N. SUBRAHMANYAN

To become a developed country with a $20- trillion economy is India’s dream at 100, characterised by better economic growth, improved general standard of living, higher per capita income, and superior performance on the Human Development Index (HDI), which includes education, literacy and health. It is oft stated that for India to grow, India must build and, therefore, by direct inference, infrastructure development is key to India realising her dream. Although the pace of infrastructure development has been impressive over the past couple of decades, there is no denying that both speed and scale must significantly increase. Fortunately, technology is emerging as the great enabler, paving the way for faster, safer, cleaner and more accurate construction with better control on quality and costs, with minimum damage to the environment.

Financing India’s infrastructure dream: India needs a more mature financial architecture that allows for a phase-wise system of financing by on-boarding different classes of investors with different risk appetites. If investors in bonds are usually not keen to bear the construction risk, banks should ideally finance projects at the construction phase with project special purpose vehicles (SPVs) empowered to issue bonds and funds during the post-construction phase to pay off the bank loans. The riskbearing can, thus, get evenly distributed among multiple players. However, the Reserve Bank of India (RBI) and other regulators would need to fine-tune the existing regulations so that the credit ratings for such bonds do not become a hindrance.