After a long debate with Planning Commission, Finance Minister P Chidambaram has finally agreed to consider funding infrastructure projects through the country's booming foreign exchange reserves that currently stand at about $170 billion.
"I have asked the finance secretary to prepare a note on how to use foreign exchange reserves for funding the infrastructure projects," Chidambaram said at a Confederation of Indian Industry function on infrastructure in New Delhi.
According to Mid-Year Economic Review, prepared by the finance ministry, an investment of Rs 14,50,000 crore (Rs 14,500 billion or $320 billion) would be required in the infrastructure sector during the 11th Five-Year Plan.
The Committee on Infrastructure, headed by Prime Minister Manmohan Singh, has estimated investment requirements of railways at Rs 3,00,000 crore (Rs 3,000 billion), highways Rs 2,20,000 crore (Rs 2,200 billion), ports Rs 50,000 crore (Rs 500 billion) and airports Rs 40,000 crore (Rs 400 billion) by 2012.
The Planning Commission has been arguing for long that the country's forex reserves should be used to improve the country's infrastructure.
Planning Commission Deputy Chairman Montek Singh Ahluwalia had earlier argued it would be prudent to exploit the foreign exchange reserves for big infrastructure projects.
However, there was a lot of resistance from both finance ministry and the Reserve Bank of India to the idea. Economists had also expressed doubts whether the reserves could be injected into the economy without side effects such as inflation.
In the Mid-Year Review, the government had also suggested deepening of debt market to diversify risks and access more capital for financing infrastructure projects.
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