Mumbai:The government may relax external commercial borrowing norms for the infrastructure sector, finance secretary D. Subba Rao told the US-India CEO Forum on 29 October 2007.
“I am not in a position to say by when the external commercial borrowing norms will be relaxed, but they will be relaxed in the shortest possible time and they will be relaxed for the infrastructure sector first,” he said in Mumbai.
Earlier, finance minister P. Chidambaram told the same meeting that while the GDP growth is expected to stay close to 9%, investment in infrastructure is lagging behind.
“There is nothing more important to sustain growth than infrastructure... this year growth is likely to be close to 9%. The rate of investment in infrastructure is lagging behind GDP growth,” he said.
Chidambaram said India needs to raise investment in infrastructure from the current level of 5% of GDP to 9% of GDP over the next five years.
The Planning Commission has estimated an investment of $488 billion in infrastructure, he said. Of this, 70% will be met by the public sector through budgetary resources and retained earnings while the remaining 30% will be funded by the private sector.
“Infrastructure financing is major challenge. We have identified some steps that have to be taken. Firstly, ECB norms for infrastructure must be made more flexible, pension and insurance funds need to invest more in infrastructure and its guidelines would have to be revisited and above all create a broad, deep and active corporate bond market,” he said.
The statement assumes significance as the government had recently tightened norms for External Commercial Borrowings to arrest the rise in rupee against the dollar by encouraging capital outflows. There has been speculation that government may relax norms for core sector firms.
Chidambaram also observed that initiatives for dedicated infrastructure funds were stalled due to the lack of projects.
“We are sensitizing state governments to make a shelf of projects for investment,” he said.