The infrastructure sector is expected to get a significant push as it is pivotal to put the economy back on a growth trajectory.
In the last budget, the government had launched National Infrastructure Pipeline (NIP) that envisaged completing 7,300 projects valued at Rs 111 lakh crore by 2025. However, raising Rs 20 lakh crore every year for these projects will be an enormously challenging exercise.
Analysts expect finance minister Nirmala Sitharaman to announce a development finance institution (DFI) to fund infrastructure projects in segments such as housing and construction that will have high multiplier effects and a major employment generator.
The institution is expected to be created by merging some existing financial institutions to meet the long-term needs of new, stalled, and work-in-progress projects.
Sources said a DFI could be partially owned by the government and would finance projects that banks and other lenders are wary of because of long gestation periods. It is a possibility that the India Infrastructure Finance Company could be merged with the new DFI, they said.
Industry chamber CII has suggested the setting up of development finance institutions by infusing equity in existing entities — Nabard for financing agriculture and rural development, Sidbi for financing MSMEs and IIFCL for infrastructure. The development financial institutions should be run by domain experts and professionals.
The Union cabinet has approved a Rs 6,000cr capital infusion in National Investment and Infrastructure Fund, a government-backed entity created to provide long-term capital.
The government has also set up Rs 25,000cr Special Window for Affordable and Mid-Income Housing Fund to help stalled projects in the real estate sector.
Apart from setting up a development financial institution, the government could reduce its stake in state owned units including banks and the proceeds from disinvestment should be used for creating health infrastructure and other physical infrastructure both in urban and rural areas.
At present, about 57 PSUs that are not banks and financial entities have an average government holding of about 71 per cent with average market capitalisation of more than Rs 10 lakh crore.
The Centre can raise as much as Rs 2 lakh crore over the next two years from 30 per cent of these holdings which could be channelised in infrastructure.
The surplus land assets of railways and defence should also be monetised and reinvested in rail and defence infrastructure.
Even assets such as ports and airports should continue to be put up for strategic sale either through the stock market or through transparent auctions. The amount received could be used to fund infrastructure.
