Development Finance Institution to boost the economic recovery

Development Finance Institution to boost the economic recovery

After making an announcement about the same in this year’s Budget, the government has approved an initial paid-up capital of Rs 20,000 crore for setting up the Development Finance Institution (DFI). In the next few years, the institution plans to raise more than Rs 3 lakh crore for financing infrastructure projects in India.

DFIs are seeing a kind of revival in a lot of developing countries like India. They have a critical role to play in an economy like ours since they don’t operate with the sole objective of maximising profits. They try as much to meet development objectives as make profits. At a time when India aims to become a $5- trillion economy, there is an ardent need for an institution that will mobilise long-term fiscal resources for socially desirable works and projects with high social returns.The DFI is set to get operational at a time when plans of massive up-grade of the existing facilities and launch of new infra projects are suffering on account of the banking crisis that started in 2019.

The Bharatmala scheme of the government for construction of highways, economic corridors and broader roads, for example, requires funfing to the tune of Rs 5.35 lakh crore. The Jal Jeevan Mission to provide piped water to about 16 crore Indian households will cost another Rs 3.5 lakh crore. The quantum of outlay on ports, airports and mass transit systems will be even higher.The proposal to have professional and industry veterans in running the DFI is also practical. The government took a similar decision to have professionals and industry experts to run the Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects’ (SWAMIH) fund which is doing well so far.

The timing of this move could not have been better since global wealth funds, including many sovereign funds, are eyeing developing countries for investment.

News Source:- Cnbctv18

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