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The Asian Development Bank (ADB) will provide India with 500 million U.S. dollars in loans to promote public-private partnerships between the government and private sector in an effort to ramp up investments in infrastructure, the bank said on Friday.
The funds will be provided to government-owned India Infrastructure Finance Co. Ltd. (IIFCL) in multiple tranches over the next four years.
It is estimated that the money will help catalyze private-sector investments in infrastructure of up to 3.5 billion dollars, said the multilateral development finance institution in a press release.
The government has been the main provider of infrastructure in India. However, public financing alone will not be able to meet the estimated 475 billion dollars needed between now and 2012 for roads, railways, seaports, airports, electricity transmission lines and other infrastructure, the lender said.
"A serious lack of infrastructure is seen as India’s Achilles’ heel and it is estimated to cost the country 3 percent to 4 percent in terms of gross domestic product every year," said Cheolsu Kim, Principal Financial Sector Specialist at ADB.
"India needs to double its current level of investment in infrastructure and to increase and mainstream public-private partnerships," the specialist added.
IIFCL will provide funds at commercial terms with over 20-year maturity for infrastructure projects, which is not currently being provided by the market.
"Establishing IIFCL to provide funds for public-private partnerships is central to the government of India’s infrastructure development strategy for addressing the prevailing market inadequacies and at the same time keeping the infrastructure development agenda moving forward," said Ashok Sharma, Director of Governance, Finance and Trade Division of ADB’s South Asia Department.
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