New Delhi: India’s first ever infrastructure debt fund could raise half of its $11 billion corpus overseas, tapping sovereign and insurance funds to finance building roads and utilities needed to accelerate growth.
A report released on June 8 by the Planning Commission said the fund would also help deepen a secondary bond market, the lack of which has hemmed in the financing of India’s targeted infrastructure spending of over $500 billion in the five years to end-March 2012.
India has consistently fallen short of building infrastructure it has planned for and this has been a drag on achieving a growth pace similar to peer China’s double-digit expansion.
The report was from a panel chaired by veteran banker Deepak Parekh and set up to draw the rules for the debt fund. It has suggested allowing the fund to raise Rs. 100 billion ($2.13 billion) each from sovereign, insurance and pension funds overseas and Rs. 50 billion from multilateral agencies.
The fund, likely to be set up by year-end, could issue bonds of up to Rs. 200 billion to domestic insurance and pension funds in multiple tranches over three years, the report suggested.
Another $2 billion could be drawn from the country’s forex reserves, which would provide the much-needed long-term debt and would also increase the volume of debt flows to the sector, the report said.