New Delhi, Aug 27 (IANS) A leading industry lobby has stressed the need for deepening long-term debt markets to facilitate availability of funds for infrastructure development.
'Deepening long-term debt markets will facilitate availability of long-term debt capital to finance infrastructure, which is key to sustaining the current levels of economic growth in the long run,' the Confederation of Indian Industry (CII) said Sunday.
For India to sustain 8 percent plus growth rate in the long run, the CII has estimated a requirement of $331 billion in the next five years to develop infrastructure.
'It would be a Herculean task to raise the level of funding required. Worldwide capital markets contribute to the major share of funding for infrastructure development,' the CII stated in a statement.
CII has pointed out that currently the capital markets in India provide sources of financing for infrastructure development in a limited sense, through equity.
'With lack of markets for long-term funds, India is starved of long-term capital, which is a necessary condition for infrastructure development,' states CII.
'Deepening the capital markets will go a long way in creating capital for infrastructure funding as well as for financing industry in general. Hence, there is an urgent need to deepen the longer-term debt markets to enable banks and development finance institutions participate in infrastructure financing.'
The industry lobby has highlighted that banks and debt financing institutions are currently not funding long-term projects due to an asset liability mismatch in the short term.
Hence, creating tradable debt-based securities would be a major area of reform to address the issue of infrastructure financing in India.
Taking steps to deepen the bonds market to cater to meet the needs of the infrastructure sector would be in line with the recommendations of the R.H. Patil Committee Report on 'Corporate Bonds and Securitisation', the CII said.
'Deepening the debt markets alone will provide for the major chunk of funding for infrastructure development. In the longer run, (it) will also pave way for the small and medium size industries that do not have very high debt rating to raise low cost debt capital,' CII feels.