Infrastructure 'Achilles Heel' of economy

NEW DELHI: Dubbing infrastructure as the "Achilles heel' of the economy, the government on Tuesday said simultaneous actions like cut in subsidy and fiscal sector reforms were needed to prop up the sector, whose investment requirements in the 11th Plan is pegged at Rs 14,50,000 crore.

"Weak infrastructure continues to be the Achilles Heel of the Indian economy... Fiscal space needs to be created by cutting down revenue expenditure including subsidies to enhance public investment in specified infrastructure where cost recovery is not possible," the Finance Ministry observed in the Mid-Year Review of the current fiscal.

The strategy included imposing user charges and chalking out appropriate financial sector reforms to provide long-term funds to infrastructure projects involving long pay back periods.

"This includes, in particular, the development of a vibrant bond market and pension and insurance reforms. Although there are institutions like the IDFC and IIFCL to cater to the long-term debt needs and equity of infrastructure projects, the demand for funds is too large to be covered by such institutions alone," the Ministry observed.

There is a need to deepen the debt market so that the risks can be diversified and more capital can be assessed. "A single unified exchange-traded market for corporate bonds would help create a mature debt market for financing infrastructure," according to the Mid-Year Review.