India is an attractive destination for global sovereign and pension funds as they are expected to invest up to $50 billion (Rs 3.36 lakh crore) in infrastructure sector over the next five years, says a report.
A research report by Ambit and The City of London Corporation says that sovereign wealth funds, global pension funds and insurance companies are interested to invest in infrastructure assets in India.
“With the infrastructure asset supply becoming scarce in western markets, there is a significant opportunity to attract meaningful investments for India from these investors,” Ambit Corporate Finance Managing Director Rahul Mody said adding this could be up to $50 billion over the next five years.
While private sector has been participating in Indian infrastructure sector over the last couple of decades through Public Private Partnership (PPP) model, its participation has slowed down significantly over the last three years.
Moreover, India’s PPP programme is concentrated to a large extent on the road sector so far. The paper noted key recommendations to revitalise the PPP framework in the Indian infrastructure sector, to enable the investors participate in the promising opportunity.
“A clear recognition of the issues by the government of India and definitive as well as time bound action to adopt these suggestions will significantly bolster investor confidence,” the report said. The key issues faced by private sector participants with respect to the Indian PPP framework include the lack of an independent regulator in certain sectors and protracted disputes and claims resolution.
Other factors include, delays in clearances and resultant cost overruns, uneven risk allocation between the public and private sectors, absence of long term financial instruments arising from the absence of a deep debt capital market and limited credit capacity of commercial banks, the research note said.