India needs to develop a debt market
India will need huge amounts of funds for its development. As the government grapples with the imperatives of bringing public finances under control and of improving execution efficiency, the role of the private sector in this domain is likely to keep growing. The Twelfth Five Year Plan put in place by the government envisages $1 trillion worth of infrastructure investments over the period 2012-2017. Of this, $500 billion or 50% is expected to come from the private sector—a significant jump from the average private sector participation rate of 25-30% during the Eleventh Five Year Plan period. Of the $500 billion worth of private sector investment towards infrastructure, $350 billion is projected to be funded through debt.
Where does the private sector raise this debt from? Infrastructure projects are long-gestation projects that require long-term funding. This would typically be the domain of the capital markets. Will the domestic private bond market be able to deliver these funds?
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