Sinha, Pankaj and Arya, Deepshikha and Singh, Shuchi (2012): Evolution of Financing Needs in Indian Infrastructure.
Download (2MB) | Preview
India has emerged as one of the fastest growing economies even in the difficult financial downturn era. In coming years, India will be demanding a large number of infrastructure services to match the demand and keep an upward sloping growth curve. Indian infrastructure including both soft (port services, air and telecom) and hard (road, railways and airways) infrastructure is growing at a fast pace at present. The country also has largest road network (3.34 million km) and second largest rail network of the world. Requirement for investment in infrastructure projects was expected to increase by 145.6% from Five Year Plan 2002-07 to FYP 2007-11. Part of the investment is expected to come from the various resources as public private partnerships and public investments. Indian government is also trying to experiment with different tools of PPP (public private partnerships) financing such as VGF (viability gap financing), SPV (special purpose vehicle) to decrease the deficits on the accounts of infrastructure. This paper studies the evolution of financing needs and consequential innovative methodologies in Indian infrastructure. Government has made various efforts to match the growth in infrastructure with country’s economy growth. However, Indian infrastructure is still lagging behind globally. This study analyzes existing frameworks available for financing and risk involved in them. India has lot of opportunity to grow using public private partnership model, but still the numbers of project financed are very less. We also have studied project financing model and capital financing model which are used by various competitive countries to India. A regression analysis has been conducted on a macroeconomic model of investment in infrastructure which takes into account the exogenous variables interest rate, inflation rate, foreign exchange rate (USD/INR) and nominal gross domestic product based on Indian data from 1987-2010. Here we study how changes in any one of the aforementioned factors impact the infrastructure investment. The paper also tries to find out the correlation between and trends followed by CNX Infra and S&P 500 based on daily time series for both. A comparative analysis of two South Asian countries namely South Korea and Malaysia has been carried out with respect to India. The objective of this study is to find out what are the similarities and complementarities between the infrastructure investments of these countries and India. This helps in suggesting which ways India can move forward in order to optimize and align its infrastructure development with its continuously burgeoning needs. Finally, we have made our recommendation to facilitate infrastructure financing optimally by removing the externalities from the existing system. We also suggest a few innovative ways to finance infrastructure in India which might prove successful.
|Item Type:||MPRA Paper|
|Original Title:||Evolution of Financing Needs in Indian Infrastructure|
|English Title:||Evolution of Financing Needs in Indian Infrastructure|
|Keywords:||Infrastructure financing, PPP (public private partnerships), Risk mitigation, capital financing|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C20 - General
G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
|Depositing User:||Pankaj Sinha|
|Date Deposited:||11. May 2012 05:08|
|Last Modified:||12. Feb 2013 20:05|
Mehta, D., Pathak, P., (1998), “Financing of Urban services in India: A case for appropriate pricing and cost recovery”, Habitat International 22.4: 487-502. Print.
Chen, A. (2002), “A new perspective on infrastructure financing in India”, Cox school of business, Pacific-Basin finance journal 10(2002) 227-242.
Ghosh, B., De, P. (2005), ”Investigating the linkages between Infrastructure and Regional Development in India: Era of planning t globalization”, Journal of Asian Economics 15.6: 1023-050.
Mor, N. , Seherawat, S. ,(2006), “Sources of infrastructure finance”, IFMR publication, Oct. 2006 Web.
Infrastructure financing, (2007), “Infrastructure public private partnership financing in India”, Pricewaterhousecoppers ltd., 30-55.
World bank report (2006), “Financing infrastructure: addressing challenges and constraints”, Publication: Financing and private sector development unit, Web.
Planning commission (2007), “Projection of investment in infrastructure during eleventh plan”, government of India, New Delhi.
Urban infrastructure financing (2007), “Fire(D) program, Developing Sustainable and Inclusive Urban Infrastructure Services: A Guidebook for 244 Project Implementers and Policy Makers” IN INDI , V0.6, 2-40, Print.
Chen, A., Kubik, J., (2003), “Sustainable development for India: Solving the infrastructure puzzle”, Cox school of business, Dallas, 1-5 abstract, USA
Gupta, L., Sharma, R. (2011), “Financing infrastructure development: India’s stock market reform and regulation”, planning commission, GOI, New Delhi.