February 01, 2019

Financing Urban Infrastructure for an Evolving India

The Observer Research Foundation's report, Financing Green Transitions, includes a chapter on infrastructure investment for the future growth of cities written by IDFC Institute's Pritika Hingorani (Director and Research Fellow), Sharmadha Srinivasan (Associate), and Harshita Agrawal (Senior Analyst). Excerpts: 


"The urban infrastructure requirement is just a subset of the national infrastructure investment requirement of US$526 billion, which includes financing required for national highways, energy, railways and other core sectors.6 While the 2008–12 public–private partnership (PPP) boom saw the entry of significant pools of private capital into the broader infrastructure sector, the situation has changed significantly since 2013. Stalled private capex projects now stand at a high of 24 percent, compared to a long-term average of 13 percent. 


This chapter attempts to address some of the financing concerns around urban infrastructure in India. It discusses why private capital is unlikely to meet the requirements of this sector and suggests that the government—central, state, and local—must play a larger role. It then seeks to expand the conversation around infrastructure financing, arguing that a proactive approach to dealing with urbanisation is critical to keep future infrastructure requirements in check. India’s urbanisation represents a fundamental spatial and economic restructuring of where people live and work. To plan and finance infrastructure, policymakers require a deeper understanding of the contours of urbanisation. A strong but flexible planning regime that anticipates urban growth can help leverage additional sources of financing and address long-term environmental sustainability concerns."

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