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Budget 2021 | A force multiplier, infrastructure needs financing boost

The government may consider changes to the financing mechanism of loans for the infrastructure sector, which is the key contributor to India's development.

January 30, 2021 / 01:17 PM IST

As India embarks on the journey to be a $5-trillion economy, the key driver for achieving this phenomenal goal will be the infrastructure sector. The sector has been one of the key contributors to India’s overall development and enjoys the government's attention with policies that would ensure time-bound creation of world-class infrastructure.

As per Niti Aayog and Quality Council of India (QCI), India will require an investment of around $4.5 trillion by 2040 to develop the infrastructure for sustaining its economic growth.

Recently, the government has also laid out a National Infrastructure Pipeline (NIP) plan to spend around Rs 100 lakh crore between FY20 to FY25 on the development of infrastructure in the country. Prioritising infrastructure investment necessarily entails extensive private sector participation as well as opening the doors for foreign investors.

Getting the private sector's back in a big way will have to be the topmost priority since the government has limited fiscal headroom. Moreover, with the COVID-19 pandemic severely impacting private sector's finances, the demand for ensuring a sustainable financing mechanism is ever so prominent. It is thus crucial for the government to explore additional interventions that have a multiplier effect on the infrastructure sector.