Only 5 percent of Indian cities’ infrastructure is privately funded. (File)
New Delhi:
India will need to invest $840 billion, or an average of $55 billion a year, in urban infrastructure over the next 15 years if it is to meet the needs of its fast-growing urban population, according to a new report from the World Bank.
The report, entitled “Financing India’s Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action” underlined the urgent need to leverage more private and commercial investment to address emerging financial gaps.
By 2036, 600 million people will live in urban cities in India, representing 40 percent of the population.
“This is likely to put additional pressure on the already stretched urban infrastructure and services of Indian cities – with increased demand for, among other things, clean drinking water, reliable power supply, efficient and safe road transport,” the World Bank said in a statement on Monday.
Currently, central and state governments fund more than 75 percent of city infrastructure, while urban local entities fund 15 percent from their own excess revenue.
Only 5 percent of Indian cities’ infrastructure needs are currently funded from private sources. With the current (2018) annual government investment in urban infrastructure of $16 billion, much of the gap, he said, will require private funding.
“Cities in India need large sums of money to promote green, smart, inclusive and sustainable urbanization. Creating a conducive environment for urban local agencies, especially large and creditworthy ones, to borrow more from private sources will therefore be crucial to ensure that cities are able to improve the living standards of their growing population in a sustainable way,” said Auguste Tano Kouame, Country Director, World Bank, India.
The World Bank report recommended expanding the capacity of city agencies to deliver infrastructure projects on a large scale.
It added weak regulation and weak revenue collection also added to the challenge for cities to access more private financing. Low service costs for municipal services also undermine their financial viability and attractiveness to private investment.
In the medium term, the report suggested a range of structural reforms, including those in tax policy and the tax transfer system, that would allow cities to attract more private financing.
In the short term, it identified a set of high-potential large cities that have the ability to attract higher volumes of private financing.
“The government of India can play an important role in overcoming market frictions that cities face in accessing private finance. The World Bank report proposes a range of measures that city, state and federal agencies can take to bend the arc towards a future where private commercial finance becomes a much bigger part of the solution to India’s urban investment challenge,” said Roland White, Global Lead, City Management and Finance, World Bank and co-author of the report.
(Except for the headline, this story has not been edited by DailyExpertNews staff and is being published from a syndicated feed.)
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