FM pitches for foreign investment in infrastructure

Chicago: Pitching for foreign investment in the infrastructure sector which needs USD one trillion in the 12th five-year plan, Finance Minister Pranab Mukherjee today asked the US investors to access the Indian debt market through a mechanism of regulated entities with a sustained long-term interest rate.

Meeting leaders of Fortune 500 companies here, he assured them that India has evolved a transparent and stable regulatory regime in sectors such as electricity, telecommunications, ports, airports, petroleum and natural gas, and a regulator for the coal sector is on the anvil.

He told them that India has recently liberalised foreign participation in the debt-equity market by allowing foreign investors to invest in the Indian equity directly. Seeking a "greater degree of involvement" of foreign investors, Mukherjee said the "debt requirement for the infrastructure sector is very large."

He said India had recently evolved a mechanism to enable access to the Indian debt market through infrastructure debt funds which will be regulated entities with a sustained long-term interest rate, long horizon entities like pension and infrastructure and insurance funds.

Those present at the meeting organised by the Chicago Council on Global Affairs (CCGA) included CCGA President Marshall Bouton; Stephen Chipman, CEO Grant for Thornton LLP; James A Gordon, President and Founder, Edgewater Funds; Brian Kenney, Chairman, President and CEO of GATX; Jennifer Scanlon, President International and Vice President USG Corporation; Matthew J

Shattock, President and CEO of Beam Inc; Gordon Hunter, Chairman, President and CEO Littelfuse Inc; and Rajeev Gautam, President and CEO of UOP LLC – a Honeywell Company.

The extent of foreign participation both through debt and equity in the financing of India`s infrastructure has been of the order of around 8 to 10 per cent in the recent past.

According to a spokesperson, Mukherjee said that so far foreign participation has been 8 to 10 per cent through debt and equity and now from January 1, 2012 India has allowed qualified foreign investors to invest in Indian equity.

Under this major initiative, they can buy stocks of Indian companies.

"So far we are observing that FIIs (foreign institutional investors) outflow of funds in India was higher than the inflow in the previous few months but now recently it has been observed that this trend has also reversed," Mukherjee said.

FII investments in India are larger and their withdrawal of funds is also from Indian stock market because many foreign investors go outside India, where rates are lower, for investment because of high interest rates in India.

Now situation is under control and RBI has recently given benefits to the banks by reducing cash-reserve ratio from 6 per cent to 5.5 per cent, which means they have given more equity. Because every bank has to keep money with RBI, more liquidity will be allowed to the banks, the minister said.

In infrastructure sector, India needed around one trillion dollars during the 12th five-year plan and out of that 50 per cent has to come from the private sector, Mukherjee said.