India to tap funds in Britain

LONDON: India is planning to set up a special purpose vehicle (SPV) in London to meet the gap in credit market to finance infrastructure development, according to Indian finance secretary Subba Rao.

Speaking at a meeting of the India Infrastructure Investment Forum (IIIF) organised by the Commonwealth Business Council (CBC) and the Confederation of Indian Industry (CII) Friday, Rao said that London was one of the most favoured destinations.

He said: "We are planning to set up a SPV outside the country to raise outside resources. It will be set up in London so government and the private sector will be involved. We plan to use forex resource for financing infrastructure and we are looking into co-financing with other institutions".

The finance secretary is visiting Britain with a delegation for annual economic and financial dialogue with the British government. The delegation discussed financial inclusion, climate change, sub-prime in the US and its impact on India and India's policy incentives on public-private partnerships (PPP) with representatives of the Treasury.

Opening the discussion on infrastructure finance, CBC director general Mohan Kaul highlighted how India's infrastructure needs had shot up from $300 billion two years ago to $495 billion today.

He said: "It is a very interesting time for Indian infrastructure finance. International finance companies are excited about it and want to be part of it. But, at times, there are some frustrations in terms of delays and clarity."

Speaking on public-private partnerships, Rao said: "We are outlaying various incentives, both financial and non-financial, for the private sector. On the financial side we are setting up two venture capitals. We are also developing the corporate bond market in India. We are introducing a shelf of PPP projects. We are also setting up PPP cells in central ministries and state projects.

"We are encouraged by the tremendous interest shown here. There is considerable interest in opening India's insurance, banking and pensions sectors. They also seek more convertible on capital.

"The government can not raise this finance on its own. So, we are keen to explore PPPs wherein we can leverage limited public sector resources with private resources. PPP will allow for effective risk allocation," he concluded.