Shalabh Tandon, Manager, Infrastructure and Natural Resources, South Asia, IFC, shares his views on the outlook for the infrastructure sector in 2015.
Infrastructure is one of the top priorities for the Indian government. The right policy framework will give confidence to both domestic and international investors and create a competitive environment to deliver cost-effective services to end-users. In the last one year, we have seen positive momentum on policy framework and clearances for projects and with the continuation of this momentum, we should see a lot more activity in the next few years.
Under the 12th Five Year Plan (2012-17), India has envisaged investments in the infrastructure sector to the tune of $1 trillion. Both public and private sectors will need to engage to develop essential infrastructure projects to help India achieve this ambitious agenda. Institutions such as IFC have been promoting private sector investments in bankable projects with acceptable risk and return profiles. One of the key critical requirements is to develop alternate source of funding for infrastructure projects like a well-developed corporate bond market. As a first step towards it, IFC recently issued rupee denominated bonds both in India and abroad, the proceeds of which will go towards funding infrastructure projects.
The reforms momentum has accelerated in the last several months. Recent policy initiatives, ranging from easing regulations to attract capital inflows to giving an impetus to the manufacturing sector through the ‘Make in India’ campaign will help to reduce external vulnerabilities, rebuild buffers, and revive investment. With the reforms momentum picking up, growth is expected to strengthen over the short term. Its pace can be fast-tracked through progressive policy and building strong business sentiments. However, growth in the medium to long term will depend upon the actual implementation of the recently announced initiatives.