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Continue investing in infra

The industry has urged the new government to continue investing in infrastructure projects. It is hopeful that the Manmohan Singh government will carry on with its progressive policies.

“In its last term the government invested heavily in infrastructure development, which is something that needs to be continued with renewed vigour. Last two months have seen FII inflows of almost US$ two billion. A strong and stable government can help the economy attract foreign investors along with lead a turnaround over the next one year,” said Rajesh Vardhan, MD, Vardhman Group.

The industry is hopeful that infusing huge financial resources into infrastructure projects could transform the economy positively.

“Massive government investment in infrastructure projects like ports, power, roads etc. would further help in stimulating the forward and backward linked sectors like cement, coal, construction equipment and steel thereby creating millions of new jobs,” said Hemant Kanoria, CMD, Srei Infrastructure Finance Ltd.

Incidentally, in a pre-budget consultative meeting with the Finance Minister (FM), Assocham Sr VP, Dr Swati Piramal expressed similar views. While emphasising the urgency for infrastructure upgradation, she said that investment in large infrastructure projects will generate significant employment and demand for steel and cement.

Acknowledging the government’s support for the industry in the past, Anil Sethi, chairman, Subhash Projects & Marketing Ltd (SPML) said persistent focus on development policies such as JNNURM, RGGVY is crucial for the growth sustenance of both the rural as well as urban infrastructure.

“It is imperative to leverage this period to ensure readiness for the next growth curve,” he said. From an infra development standpoint, Sethi said that India should continue to focus on the public-private-partnership (PPP) modules, which will help standardise the pattern.

There are clear indications that the government will remain committed to PPP. In her address to the joint session of the 15th Lok Sabha on June 4, Mrs Pratibha Patil, President of India, has said that PPP projects are a key element of the government’s infrastructure strategy.

“A large number of PPP projects in different areas currently awaiting government approval would be cleared expeditiously. The regulatory and legal framework for PPPs would be made more investment friendly,” she said.

Kanoria emphasised that since infrastructure projects have a longer payback period, in order to ensure a proper asset liability match, infrastructure financing NBFCs need to have access to long term funds.

The option of External commercial borrowings (ECBs) is one of the few sources of long term funds available to NBFCs but it has constraints.

“It is restricted to multilateral/regional financial institutions and government owned development financial institutions whereas there are a large number of foreign financial institutions who would happily lend to infrastructure financing NBFCs.
Hence, government should relax the restrictions to ensure flow of cost effective and long term source of funds to this sector,” Kanoria added.

While urging the government not to curtail the investment planned/budget allocated for infra, Sethi also underlined that infrastructure companies should be equally careful about managing their funds and resources.

Overall, Construction Week (India) is quite optimistic about the forthcoming budget with regards to the infrastructure industry. Both the FM as well as the President in their respective addresses have recently reiterated this point.

The President has highlighted the paramount importance of public investment in this sector and the FM has promised that the infra pipeline will be re-appraised and made more robust. “Where necessary, policy and procedures will be calibrated to give a boost to infrastructure spending,” he said.

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Sept 2020
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