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Increased infra spending via IIFCL to protect jobs: World Bank
March 09, 2009 17:43 IST
The World Bank has said that India's move to allow its infrastructure finance company IIFCL raise Rs 40,000 crore (Rs 400 billion) to fund core sector would help the country to perk up slackening demand and also protect jobs amid the economic slowdown.
Through stimulus packages, the Indian government recently allowed IIFCL to raise Rs 40,000 crore through tax free bonds to aid the financing of infrastructure projects which were being carried out as public-private partnerships, the Bank said.
However, at present, Indian Infrastructure Finance Company Ltd is allowed to raise only Rs 10,000 crore (Rs 100 billion) and the decision on the remaining Rs 30,000 crore (Rs 300 billion) would be taken in 18 months, if required, it added.
"In response to rapidly deteriorating growth, the central government has allowed the IIFCL to raise Rs 400 billion (Rs 40,000 crore) to help with the financing of projects (largely for road and ports) that were being implemented as public-private partnerships," the World Bank said.
Of the Rs 10,000 crore (Rs 100 billion), the company has already raised Rs 7,369 crore (Rs 73.69 billion) through the first round of private placement. It is in the process of raising the second tranche of Rs 2,631 crore (Rs 26.31 billion).
In the ongoing issue, slated to close on March 18, the company mopped up Rs 2,200 crore (Rs 22 billion). The multilateral lending agency in a paper titled 'Swimming Against the Tide: How Developing Countries are Coping with the Global Crisis' has said that additional resources being made available through the IIFCL would refinance loans 'originally provided by commercial banks'.
"This will ensure that these projects, which will help address some of the infrastructure bottlenecks that have been a huge constraint on India's long-term growth, are able to proceed, and help support aggregate demand and protect jobs during the economic downturn," the World Bank noted.
It noted that Rs 40,000 crore represents about 0.7 per cent of the India's GDP.
The background paper has been prepared for the G20 finance ministers and central bank governors meeting in the UK, this month.
"The infrastructure projects that are eligible for financing (mainly in the roads and port sectors) were well-advanced in their design and many were near financial closure prior to the crisis and had been, or were at the risk of being, delayed on account of the global credit crunch," the World Bank pointed out.