FDI in pension sector will help meet infra targets: Assocham

NEW DELHI: The government should allow FDI in the pension sector as this will increase the volume of assets which can be used to develop the country's infrastructure, an industry study has said.

"FDI in pension funds will further increase the volume of assets that can be invested into infrastructure. India requires one trillion dollars (about Rs 52 lakh crore) for infrastructure investments during the 12th Five-Year Plan (2012-17)," Assocham said in its study.

The study said permitting foreign investment in pension funds will give global pension fund companies access to the vast, untapped Indian market.

The massive investment required in infrastructure cannot be financed by traditional sources of public finance. Amid falling corporate sector performance, even the private sector has monetary constraints with respect to funding huge infrastructure projects, it said.

If pension funds are diverted for infrastructure projects, they will ensure long-term income streams, stability, predictable cash flows, low default rates, project diversification and societal benefits, the study said.

Foreign direct investment in the pension sector subject to a 26 per cent cap was one of the features of the Pension Funds Regulatory and Development Authority Bill, 2011, that was tabled in the Lok Sabha during the just-concluded Winter Session.

However, on account of a lack of cohesion between the Congress Party and its allies in the coalition government, the Bill could not be passed.