News: 'India needs $50 b annually for infrastructure'

(RTR 09/10/2006) New Delhi - India needs to reforms its pension and insurance sectors and develop a corporate debt market to raise long term funds of $50 billion annually from domestic markets to improve its rickety infrastructure, the Finance Minister, P. Chidambaram, has said.

Asia's fourth largest economy must also explore ways of attracting foreign private equity in long-gestation projects like power plants, ports, roads, airports, he told a business conference here.

India faces a shortage of long term debt instruments that could raise funds for infrastructure projects.

"We have to raise $50 billion a year from the country. It is not impossible if we put in place a mechanism to tap long term savings," the minister said.

"We need to press ahead pension and insurance reforms."

The government tabled a bill in Parliament last year to allow private pension fund managers to handle long term savings. It also proposed to raise the foreign investment limit in insurance to 49 per cent from the present 26 per cent .

But the coalition government faced stiff opposition from its communist allies lending crucial support in parliament.

"We are working with coalition partners to pave the way for pension bill in the next two few weeks," Chidambaram said.

The government was also discussing with financial regulators to frame rules for corporate debt market, he said, adding Indian firms should try to tap foreign private equity for funding infrastructure projects.

"We must be willing to think out of the box. There is enough private capital jostling around the world and we must tap that."

The minister also said growth in bank loans at an annual 31 per cent was not a cause of concern as long as most of it goes to productive sectors like the manufacturing, farm and services sectors.