Policymakers across the world are on a quest for sustainable and impactful strategies to fast-track economic recovery after the pandemic. In this process, governments in various jurisdictions have yet again turned towards large-scale infrastructure investment programs to catalyse broad-based economic growth. This has resulted in massive infrastructure focussed initiatives being unveiled globally.
India had reinvigorated its infrastructure policy push even before the pandemic. India announced the USD 1.5 trillion National Infrastructure Pipeline as early as in August 2019. Since the global health crisis, policy, and public support for a large-scale infrastructure development program in the country has only strengthened – with the launch of the National Monetisation Pipeline and the Gati Shakti program.
The sheer size and scale of our infrastructure plan necessitates collaboration and engagement between all key stakeholders – central and state government departments, regulators, developers, operators, and institutional investors. Given this context, a quiet but pioneering development has been effected recently in the corridors of the North Block – establishment of the Infrastructure Finance Secretariat (IFS) under the Department of Economic Affairs, Ministry of Finance. While the IFS has subsumed the erstwhile infrastructure policy and support divisions of the DEA, this move aims to substantially boost the capacity and capabilities under the infrastructure team.
The underlying philosophy behind the IFS had been brewing in the minds of policymakers for some time now. In fact, the Government had even announced plans for creation of an entity called ‘3P India (3PI)’ in one of the earlier annual budgets – but it could not be implemented amid other economic priorities. Nevertheless, the IFS has now been set up and is coming together at a fast clip – with a much sharper mandate. The IFS embodies the entire essence of the earlier proposed 3PI, albeit in a slightly different format. And this makes eminent sense given the lessons from other countries to be dynamic in shaping such institutional frameworks. The UK provides useful pointers in this regard having over the years, seen the metamorphosis of some of their similar institutions.
The policy framework and overall PPP ecosystem in India is already considerably evolved. Over the last few years, the policy orientation has undergone a paradigm shift from a prescriptive to a collaborative approach. The Government is extremely receptive to stakeholder feedback on a wide array of topics, from standardised contracts and payment security mechanisms to single point interfacing and fiscal support measures. Further, the Indian infrastructure space is witnessing the benefits from the presence of novel financing vehicles that can provide risk capital at scale. Instruments such as REITs and InvITs have gained considerable traction – having raised over USD 9.25 billion in the last 4 years alone and institutions such as National Investment & Infrastructure Fund Limited (NIIFL) and NaBFID having been set up to catalyse the flow of equity and debt capital from across the world into Indian infrastructure projects.
The IFS is expected to provide further fillip to the initial momentum created by the various initiatives. Specifically, it is envisaged to play a role in three important areas – (i) facilitate and enhance the infrastructure financing ecosystem; (ii) sectoral studies to identify and resolve industry-specific issues – including dispute resolution and project implementation challenges; and (iii) spearhead capacity building initiatives at various levels of the Government (including the sub-sovereign level) in order to propagate and boost the PPP framework. Each of these objectives are well calibrated towards unlocking the Indian infrastructure sector’s long-term potential.
The IFS team, supported by subject matter experts from multilateral institutions have already pressed the pedal on a range of initiatives. As an example, the IFS recently organised four different workshops within a span of less than one month – (i) a discussion with leading InvIT and REIT players, (ii) a session focussed on IDFs, (iii) a meeting with group of states on their PPP project initiatives, and (iv) the national level infrastructure financing institutions. The IFS brings together key stakeholders from relevant line ministries and regulatory bodies to these meetings, for a holistic discussion on pertinent issues to work out actionable measures. The open-styled discussions have been constructive and solution-oriented. This example is just to illustrate the multi-pronged approach that is being adopted by the IFS division and there are several other activities that are happening in tandem.
Given the importance of infrastructure financing, the IFS division has been appropriately housed under the Ministry of Finance, thus providing it with the necessary heft and a 360-degree perspective required to make a tangible difference to the economy. In the years to come, the IFS could indeed prove to be one of the most crucial pieces in India’s infrastructure financing and development jigsaw.