FM Arun Jaitley to up public spending, advocates for funding infra projects through domestic savings

MUMBAI: The government will increase in public spending as well as introduce a new model for infrastructure funding in an attempt to clear all stuck projects, which in turn would spur the country's growth, said the finance minister Arun Jaitley.

"We will now have to enter a new age where all models of financing... infrastructure will have to be explored. A particular model is being created," said Jaitley while addressing conference here in Mumbai on city's infrastructure requirements to become a financial centre; through a video call.

"The whole concept of spending beyond your means and leaving the next generation in debt to repay what we are overspending today is never prudent fiscal policy," he said.

Jaitley also said that power, energy, railway and ports will be high-priority sectors for the government.

"During the last few weeks, we have had a series of visitors who showed a great amount of interest in financing infrastructure," he said without divulging any details. The government is actively considering a financing model after the series of discussion with international investors.

Infrastructure companies have been struggling to get long term funding, since banks are averse to lend for 10-20 years, due to asset liability mis-matches. Consequently, many long term projects are stuck slowing the country's growth engine. Infra companies too have defaulted on their loan repayments as their projects were not commissioned in time.

A few years ago, authorities had tried with some measures like take-out financing where lenders could exit before the full project tenure and another new lender could enter. But, it too fell short of taking off.

The finance minister has also advocated for converting domestic savings into financing long term infra projects. "We will have to...increase the level of public spending. We will have to convert domestic savings into investment for infrastructure," Jaitely said.

The finance minister has criticized the former UPA-led government for its indifference in building country's infrastructure needs.