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Is Rs10k crore stimulus for infra a good start?


As a fiscal stimulus to the infrastructure sector, the India Infrastructure Finance Company Limited (IIFCL) has announced that it will issue bonds worth Rs10,000 crore. The move comes as the government is pulling out all stops to inject fresh liquidity into the market and thankfully infrastructure seems to be getting priority.

While Rs10,000 crore is inadequate given the huge requirement of funds to sustain the nation’s infrastructure development, the industry is not entirely unhappy.

“It is certainly a welcome step and we appreciate it. We know it is not enough given the enormous funding requirement, but the government has taken steps in the right direction. It is a good start,” said Amitabh Das Mundhra, director, Simplex Infrastructures Ltd.

Anshuman Magazine, chairman and managing director, South Asia for CB Richard Ellis also welcomed the step calling it a positive move for the industry. “The fact remains that infrastructure needs liquidity and this is a good way of generating it,” he said.

Mundhra also pointed out that firms involved in infrastructure development too need to understand their responsibility. He said: “Building India’s infrastructure is a Herculean task; apex organisations in this space need to increase their bandwidths.”

Mundhra whose firm has worked on more than 2000 infrastructure projects and is currently active on several has also urged the government and IIFCL to follow up the announcement with actual action. “Any measures taken to increase liquidity in business is good but the government should make it happen.” He remarked that once the money is raised it is equally essential to utilise it for the right purpose. “Proper and timely disbursements should follow the mobilisation of funds.”

Magazine too said that the government must facilitate implementation. “Funding certainly is a key issue but I think it is equally important the government focuses on the other aspects of this sector. When money was coming in before the downturn began, many investors didn’t know how to invest as it was a very complicated process. This process needs to be smoothened,” Magazine explained.

He added that this was the right time to sort out the processes and address issues like accountability, transparency and land acquisition. “We already know the challenges faced and now we need to see some substantial action towards tackling these challenges,” he added.

Infrastructure projects inherently have long gestation periods and investors need to have a level of comfort in terms of processes and transparency. Once investors get this comfort, more funding will naturally follow. This is exactly why Magazine insists on better processes.

Interestingly, with the Rs10,000 crore bonds being tax free, IIFCL is hoping that it will have a fair amount of individual retail involvement.

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June 2020
10 Jun 2020