India needs to double capex in medium term to fund infra: DEA Secy

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November 17, 2021 9:52 PM

Efforts, he added, have to be made to channelise all avenues of savings for garnering resources for stepping up investment in the infrastructure sector.

India needs to double the capital expenditure in the medium term from about 5-6 per cent of the Gross Domestic Product (GDP) currently to fund infrastructure, DEA Secretary Ajay Seth said on Wednesday. Efforts, he added, have to be made to channelise all avenues of savings for garnering resources for stepping up investment in the infrastructure sector.

“By and large, the capex, both infrastructure and industrial capex is about 5-6 per cent of the GDP size. We have to take it at least to double in the medium term, which requires all avenues to channelise savings and savings will come from based on the needs of each class of investors,” Seth said at the CII Global Economic Policy Summit 2021.

Economic growth has to come from a virtuous cycle of private investment with private sector having a larger and larger economic role, while Government’s role would be that of a facilitator, Seth said. He further said that the Indian capital market has to mature to enable investors to attract long term funds.

“When it comes to long term financing, that is something our capital markets are yet to mature where we can attract long term investors from say the household sector to put that long term money. Because for infrastructure long term money is required,” he said.

Seth further highlighted that India’s banking sector is now on a much stronger footing post major reforms such as the Insolvency and Bankruptcy Code and the setting up of a ‘bad bank’, among others. However, long term financing is an area where India’s capital markets are yet to mature, he noted.

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