CII Proposes DFI, Infrastructure Bonds to Boost Long-Term Funding
The Confederation of Indian Industry (CII) has proposed a series of measures to boost long-term funding for India's infrastructure sector. The industry body suggests setting up a large Development Finance Institution (DFI) and creating a new category of bonds for infrastructure financing.
CII recommends establishing a DFI with specialized expertise to provide long-term funding to industry and infrastructure. This is because infrastructure funding requires different evaluation methods than traditional banking. To facilitate this, CII proposes creating a separate categorization of bonds for infrastructure financing.
The government is urged to allow public and private infrastructure companies to issue tradable zero coupon, long-term tax-free infrastructure bonds. Additionally, CII suggests setting an exemption limit for mutual funds towards exposure to these bonds. To attract investments, CII proposes creating a 'India Infrastructure - INR 500 billion Credit Guarantee and Low Interest Long Tenure Government Loan Scheme'.
The government plans to spend INR 102 lakh crores on infrastructure over the next five years, with the private sector contributing 22%. CII's recommendations aim to streamline project awards to the private sector after securing key sovereign clearances, avoiding delays and cost overruns. By implementing these measures, India seeks to strengthen its infrastructure sector, a key driver of its economy.
