In an Independence Day speech on Monday, Indian Prime Minister Manmohan Singh said India’s Twelfth Five-Year Plan, set to begin in 2012, “would further accelerate infrastructure investments” across the country, particularly in rural areas.
“We will pay special attention to the remote areas of our country and to rural areas. Connecting such areas by rail and road will get the topmost priority,” Singh said, according to a transcript of the speech reprinted in the Times of India.
Singh said that infrastructure investment, measured as a percentage of gross domestic product, had increased more than one and half times in the past seven years. India’s Eleventh Five-Year plan, once completed, would double the amount of power generation capacity added during the Tenth Five-Year Plan, he said, adding that he expected further acceleration under the Twelfth Five-Year Plan.
Singh’s speech comes just a week after India’s Ministry of Finance outlined new regulations allowing foreign investors to buy up to $3 billion in infrastructure companies’ debt via mutual funds registered with the regulatory agency Securities and Exchange Board of India.
Officials at the Finance Ministry met with business leaders on August 1 to discuss “ideas on giving further impetus to India’s economic growth,” Thomas Mathew, Finance Ministry joint secretary, wrote in a statement.
“One of the important suggestions that came from the industrialists was to make the debt market vibrant for the infrastructure sector,” Mathew continued. “The government accepted this recommendation and held a series of discussions with the regulators to give [qualified foreign investors] access to [mutual fund] debt schemes investing in infrastructure.”
Foreign investors can commit up to $3 billion to mutual funds investing in corporate bonds issued by infrastructure companies with minimum residual maturity of five years, according to the statement.
Earlier this year, the Finance Ministry also outlined infrastructure debt funds (IDFs) that could provide long-term funding for infrastructure projects. In a June statement, the Finance Ministry said IDFs could target sources of savings like “insurance and pension funds which have hitherto played a comparatively limited role in financing infrastructure”.