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Informist, Tuesday, Sep 3, 2024

 

--IFSCA head: Financing, quality two challenges for infra growth

--CONTEXT: IFSCA Chairperson K. Rajaraman at CII-organised event 

--IFSCA head: Infrastructure development remains an unfinished agenda 
--IFSCA head: Pvt sector needs to step forward for infra development 
--IFSCA head: Pvt sector needs to invest in research, development 
--IFSCA head: Expect intl arbitration svcs to take off by year-end 
--IFSCA head: Will provide full support for family offices in GIFT city 
--IFSCA head: Too much regulation impedes effective business 

 

MUMBAI – Several key areas of growth in financing must be addressed to support India's goal of becoming a developed nation by 2047, K. Rajaraman, head of the International Financial Services Centres Authority, said at a Confederation of Indian Industry conference today. He added that infrastructure is a vital area for the same. However, while much has been done, it's still a work in progress.

 

"Infrastructure is an unfinished agenda. A lot of work has been done...the government of India has also come out with new ways of doing infrastructure in this country..but the two major challenges we still face in this area are financing and quality," Rajaraman said.  

 

To address financing, the government established the National Monetisation Pipeline, which allows government agencies to build infrastructure and then hand it over to the private sector to manage and maintain over the long term, Rajaraman said. Though the monetisation pipeline is a positive step, he suggested that further growth could come from expanding Real Estate Investment Trusts and Infrastructure Investment Trusts to encourage more private sector involvement.

 

"The national monetisation pipeline seems to work, and I am sure that it has to be taken to scale, but now the big question is how do we attract more and more financing to the infrastructure system...REITs and InvITs could be an extension of the national monetisation pipeline for private sectors," Rajaraman said. Simplifying the regulations for these instruments, as the Securities Exchange Board of India plans to do, could facilitate this process, he added.

 

Another important factor Rajaraman listed is the quality of infrastructure. "The most important thing the infrastructure sector needs to look at, urban or commercial, is quality. The design life should be of at least 100 years, because if that is not done, then it is very insufficient way of doing infrastructure in this country...we can't afford it that way. So, bringing standards infrastructure is absolutely essential.

 

Rajaraman said the private sector must invest in research and development for the next 25 years for India to create new global standards. "The private sector should invest in R&D. We need to incentivise, motivate companies to actually invest in R&D which is absolutely important for next 25 years…and to it doesn't appear very difficult. We can work with the government to make a lot of things work," he said. The issue isn't a lack of funds, but rather a lack of willingness and commitment in various parts of the country, he added.

 

On arbitration system, Rajaraman said the finance minister recently announced that an international arbitration system would be established in GIFT City, with the government working on regulations to provide comfort to international companies signing contracts there. The initiative is expected to gain traction by the end of the year. "The finance minister in the recent budget announced that international arbitration system would be made available in GIFT City, and government is working on regulation, and we expect that it will actually help international companies to sign contacts out of GIFT City in a manner that provides them comfort. We expect that to take off by end of this year," he said.

 

He said that regulation plays a key role in ensuring fairness, transparency, and the protection of consumers and investors, which are non-negotiable principles in the marketplace, but while simplifying regulations is important, overly prescriptive rules can hinder business effectiveness. "Too much of prescription impedes effective business, and we believe that principal based regulation is way forward and that is what will take this forward," he added.

 

Regarding family offices, Rajaraman said the focus is to provide a robust platform and regulatory framework for all types of fund managers, including family offices, to operate out of GIFT City. Efforts are being made to attract family offices, with full support offered to help them thrive.  End

 

Reported by Sachi Pandey

Edited by Vidhi Verma

 

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