The economic survey, on Thursday, asked the Centre to incentivise fund mobilisation and bring comprehensive but simple policy and regulations for infrastructure sector that requires Rs 20,00,000 crore.

“Despite efforts to accelerate the pace of infrastructure development, the demand for infrastructure services have grown even faster than the supply so that the constraints may have become more binding,” the survey noted.

Infrastructure growth during April-December slowed down to 5.7 per cent against 8.9 per cent a year ago. “The development of adequate infrastructure is a critical pre-requisite for sustaining the growth momentum and to ensure inclusiveness of the growth process,” according to the survey.

Debt market

This would require mobilisation of unprecedented amounts of capital in tandem with “policy and regulations that are comprehensive but simple and clear and credible.”

“The long-term debt market should be developed to support infrastructure projects during the 11th Five Year Plan,” the survey said pointing out that average nine per cent growth during 11th Plan could be achieved only if infrastructure deficit was overcome. The survey also expressed concern that growth in output of the infrastructure sector and its capacity, particularly power, has been relatively modest as compared to the robust performance by services and manufacturing.

Limited scope

“An early head start is crucial for translating investment targets into investment intentions and investment into ground realities,” it noted, observing the Centre would have to pump in more than 37 per cent of the $500 billion funding requirement, while the private sector would have to pool in over 30 per cent.

The survey said the Committee headed by Deepak Parekh in its report had pointed out that within the FRBM laws there is a limited scope for the Centre and States to increase budgetary support and guarantees in financing infrastructure projects.

Moreover, there is lack of availability of risk capital to support debt, coupled with inadequate flow of equity capital into the sector. The NBFCs are also constrained due to lack of access to low-cost financing options and exposure norms, it added.

The measures being taken by government to address these constraints include Indian Infrastructure Finance Initiative to deploy about Rs 20,000 crore capital for infrastructure projects, and IIFCL setting up a special purpose vehicle (SPV) to utilise part of the forex reserves on the sector.

Total resources

In roads and bridges sector, the 11th Plan envisages a total investment of Rs 3,14,152 crore, of which the Centre and private sector are expected to contribute about 34 per cent each, and the remaining would come from the States.

During April-December last year, the infrastructure sector saw power generation growth decelerating from 7.5 per cent to 6.6 per cent, while the transport sector had a mixed picture with growth in railway traffic slowing down but port and air cargo traffic increasing, the survey noted.

Of total resources required for infrastructure sector during the 11th Plan period, a substantial part would have to come through domestic bank credit, non-bank finance, pension and insurance funds besides external commercial borrowings route, it said.