Union Budget 2021: Development Finance Institution for infra projects worth Rs 111 lakh crore likely to be announced
New Delhi | Jagran Business Desk: Finance Minister Nirmala Sitharaman is expected to announce the setting up of a mega Development Finance Institution (DFI) in the Union Budget 2021, according to a report by Hindustan Times. The institution will be created by merging some existing financial institutions to mobilise Rs 111 lakh crore required for funding of the ambitious national infrastructure pipeline.
The report quoted people aware of the matter saying that infrastructure development will put India on a higher growth trajectory and impact every sector of the economy.
They said that mega DFI is needed for long-term financing of infrastructure projects with long gestation periods, for which commercial banks will not be sufficient. They said the DFI will not only fund new projects, but also help revive stalled projects worth at least Rs10 lakh crore.
The proposed mega DFI may include an existing financial institution and some existing funds, according to the report.
"The government has already announced its ambitious Rs 111 lakh crore National Infrastructure Pipeline, which will require debt financing of at least Rs60-70 lakh crore in the next four-five years," a person aware of the matter was quoted as saying.
Earlier, Financial Services Secretary Debasish Panda, in an interview to news agency PTI, had said: "We need a development financial institution as infra financing needs patient capital, and banks are currently not suited for lending for long term projects which do not generate any cash for years."
In her last Budget speech, Finance Minister Nirmala Sitharaman had proposed to set up DFIs for promoting infrastructure funding. About 7,000 projects have been identified under the National Infrastructure Pipeline (NIP) with projected investment of a whopping Rs 111 lakh crore during 2020-25.
NIP, a first-of-its-kind initiative to provide world-class infrastructure across the country and improve the quality of life for all citizens, will be crucial for attaining the target of becoming a USD 5 trillion economy by FY 2025.
During the pre-liberalised era, India had DFIs which were primarily engaged in development of industry in the country. ICICI and IDBI, in their previous avatars, were DFIs. Even the country's oldest financial institution IFCI Ltd had acted as a development finance institution.
Posted By: Abhinav Gupta