Speaking at the concluding session of the conference on "Private sector participation in the Indian infrastructure", here on Friday, he said the requirement would grow to 8.5 per cent of the GDP in the next few years. He further added that about 85 per cent of the funds would have to be generated from domestic sources.

Sarma pointed out that if SEBs could achieve a positive rate of return of 3 per cent as much as Rs 14,000 crore could be generated as internal resources. However, for that state governments would be needing to rationalise the tariff structure.

He also said that finance ministry would soon come out with a package of reforms for the banking sector.

Sarma said that "we are considering various measures and will come up with some sort of agenda very shortly."

The finance ministry, it may be mentioned, is looking at the various suggestion of the Narasimham committee report on banking sector reforms which include reducing government stake below 51 per cent in the banks.Sarma, on his part, underlined the need for harmonisation of interest of savers and borrowers. He also spoke about steps being taken by the government to usher in derivatives trading, opening of insurance/pension sector and clearly defining the jurisdiction of Reserve Bank and Securities and Exchange Board of India.

All this, he said, was aimed at deepening the capital and debt markets so that enough funds could be generated and channelised for development of infrastructure sector.

He also underlined the need for more specialised funding institutions like Power Finance Corporation (PFC) and Infrastructure Development Finance Corporation (IDFC) to push economic reforms at the state level.

The secretary added that the specialised institutions could emulate World Bank style of functioning in pushing forward economic reforms programme.Sarma also felt that "every rupee spend by the government should be a reform rupee" and should help in putting in place a system conducive for economic growth.

The reform, according to Sarma, should ensure competition, provide operational autonomy, depoliticise tariffs and genuine regulation. He also suggested that to lure private participation, the entry must be made competitive.

The secretary also underlined the need for fiscal stability at Centre and state level and wanted the governments to take corrective steps on urgent basis.