In a global economy which is flush with liquidity, the budget has strategically opened the doors for global capital to fund the growth needs of India. This is a master stroke. A big thrust on monetisation of operational assets like roads, airports, transmission towers etc is a clear win-win for both the government and investors. This will not only help the government to manage its fiscal deficit, but will also help unlock capital for investing in other greenfield infrastructure projects. There is considerable interest from global pension funds and insurance companies for these assets and the long-term, inflation-indexed cashflows make this space very attractive for patient institutional capital.
The creation of an infrastructure-focused Development Finance Institution with a capital base of Rs 20,000 Cr (~ $3 bn) is a very good initiative from an economic standpoint. By providing finance for infrastructure projects, which are envisaged under the National Infrastructure Pipeline, this will provide the stepping stone for funding infra projects in India. Coupled with this the zero coupon bond issuance by IDFs to fund infra projects is another enabler for capital to flow freely.
The budget connects capital to infrastructure which has been the biggest missing link. What we now need is meticulous structuring of these initiatives and good execution.