Industry body PHDCCI, in its latest report, has highlighted that Indian Government will have to undertake a massive provisioning of Rs 26 lakh crore for the next five years beginning 2015 to finance infrastructure projects to provide a fillip to 'Make in India' campaign and help the economy attain 7-8 percent growth. Investment norms for pension funds and for insurance companies will have to be liberalised further to utilise their corpus to part finance infrastructure projects.
The report further added that out of the estimated Rs 26 lakh crore almost 80 percent of the amount will be needed for for infrastructure projects such as power, roads and urban infrastructure. In roads, investments would be driven towards building national highways and state roads, whereas in power, generation will continue to account for the largest share of investments. Referring to urban infrastructure, municipal bodies are likely to require significant investments for constructing urban roads, expanding its transport and revamping water supply and sewerage infrastructure.
On the source of funding, PHDCCI stressed that 70 percent of the projected Rs 26 lakh crore investment financing will have to be funded through debt, with banks remaining the largest source of finance. External commercial borrowings (ECBs) may provide funds to the extent of 14 percent and the remaining amount is expected to come through bonds issuance. However, the report also raised concern over the asset-liability mismatch for banks, underscoring that it would be difficult for banks alone to finance infrastructure projects as infrastructure project loans have long tenures of 10 to 15 years while bank deposits, the main source of funds, typically have a maturity of less than three years.