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Informist, Tuesday, Sep 3, 2024

 

--Econ secy: Need to invest in financial literacy, awareness 
--Econ secy: To come out with taxonomy for green financing in 6-8 mos 
--Econ secy: Need credit pdts for various stages of infra projects 
--Econ secy: Need better capital availability for infra sector 
--Econ secy: Innovative ways of financing MSME needed 
--Econ secy: Need to deepen, broaden corporate bond market 
--Econ secy: Need to expand access for insurance pdts going forward 
--Econ secy: Need to expand access for credit products going forward

 

MUMBAI – India needs different types of credit products to address the funding needs of infrastructure projects at various stages, Department of Economic Affairs Secretary Ajay Seth said today.

 

"The agenda for next five-seven years is deepen the bond market and better credit assessment. At the same time, different credit products for various stages of infrastructure projects," he said at the 'Financing 3.0 Summit' organised by the Confederation of Indian Industry.

 

Currently, the central and state governments are primarily bearing the burden of developing infrastructure, he said.

 

Seth also pointed to the need to further deepen and broaden the corporate bond market. "The agenda has to be the need for deepening and widening of the bond market. Over 80% of the issuances are 'AAA' rated. That means that a vast segment of economic players are unable to tap the bond market and that is something, growing up at 7% for 20 years, we want all hands on deck. It can't be that only one segment of the economy is doing better and the rest is trying to catch up. That perhaps is not the best way of sustaining it," he said.

 

Emphasising the urgent need to boost infrastructure in the country, Seth said that depending on the lifecycle of infrastructure projects, a combination of different financial products may be used. 

 

"In the construction phase where the risks are more, perhaps the banks can come in. But once the assets move on to operating mode or the revenue earning phase, then the bond market or the infra NBFC step in, because the construction risk has been taken away. At the same time, private equity funds or the infrastructure investment trusts coming in for equity," he said.

 

Over the last 10 years, the financial sector has developed significantly and high-quality and efficient financial products are now available at a low cost, which is catering to a wide spectrum of investors and borrowers, Seth said. "The government would like to have a neutral fiscal stance for various financial asset classes and service providers so that the investors, service providers, asset providers can decide based on their risk-return appetite rather than depending their decisions on the fiscal stance," he said. In order to ensure market participants make the right choices, they need to be financially literate, he said. 

 

Highlighting the need to channel financial resources better, Seth said there is scope for insurance and pension funds money to flow into various sectors. He said that going ahead, India needs to "expand access for credit products, it's not just about opening an account but it's seeing how much of credit is flowing through those accounts". He cited the need to "expand access for insurance, pension, and capital market products". 

 

Seth said the government was also focusing on ensuring adequate funding to micro, small and medium enterprises. "As we know, MSMEs are the backbone to our economy – 35% of the manufacturing output, 45% of exports, almost 70% of employment, but credit to MSMEs is 15% of the total non-food credit in the economy," he said. "Innovative financing solutions such as microfinance, peer-to-peer lending and digital platforms are the way to move forward for that sector."

 

On the topic of taxonomy for climate finance that was announced in the Budget presented in July by Finance Minister Nirmala Sitharaman, Seth said the government is likely to introduce this in the next six-eight months.

 

In the Union Budget for 2024-25 (Apr-Mar), Sitharaman had said, "We will develop a taxonomy for climate finance for enhancing the availability of capital for climate adaptation and mitigation. This will support achievement of the country's climate commitments and green transition."  End

 

Reported by Sagar Sen and Kshipra Petkar

Edited by Avishek Dutta

 

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