News Highlight
The World Bank published a report titled “Financing India’s Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action.”
Key Takeaway
- The report underlines the urgent need to leverage more private and commercial investments to meet emerging financial gaps.
Key highlights of the report
- Increase urbanisation
- By 2036, 600 million people will be living in urban cities in India, representing 40% of the population.
- This will likely put additional pressure on the already stretched urban infrastructure and services of Indian cities.
- The central and state governments currently finance over 75% of city infrastructure, while urban local bodies (ULB) finance 15% through their own surplus revenues.
- Investment in infrastructure
- Indian cities will require an investment of $840 billion in infrastructure and municipal services till 2036 to meet the needs of its fast-growing urban population.
- It is equivalent to 1.18% of the estimated Gross Domestic Product (GDP) over this period.
- Basic municipal services
- The report said that over half of these investment ($840 billion) needs, nearly $450 billion would be required in essential municipal services (water supply, sewerage, municipal solid waste management, stormwater drainage, urban roads and street lighting).
- Expanding the capacities of city agencies
- The new report recommends expanding the capacities of city agencies to deliver infrastructure projects at scale.
- Currently, the ten largest urban local bodies (ULBs) could spend only two-thirds of their total capital budget over three recent fiscal years.
- Lack of private participation
- Only 5% of the infrastructure needs of Indian cities are currently being financed through private sources.
- A weak regulatory environment and revenue collection also add to the challenge of cities accessing more private financing.
- Low service charges
- Between 2011 and 2018, urban property tax stood at 0.15% of GDP compared to an average of 0.3-0.6% of GDP for low and middle-income countries.
- Low service charges for municipal services also undermine their financial viability and attractiveness to private investment.
- Structural reforms
- The report suggests a series of structural reforms to be taken up over the medium term, including those in the taxation policy and fiscal transfer system – which can allow cities to leverage more private financing.
World Bank
- About
- The World Bank is an international financial institution.
- Foundation
- It was formed with the International Monetary Fund at the 1944 Bretton Woods Conference.
- Headquartered
- It is headquartered in Washington, D.C, United States.
- Members
- International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) have 189 and 174 member countries, respectively
- A country must first become a member of the IMF before joining the World Bank Group.
- Five development institutions
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Guarantee Agency (MIGA)
- International Centre for the Settlement of Investment Disputes (ICSID)
- Functions
- It provides loans and grants to the governments of low- and middle-income countries to pursue capital projects.
- Reports
- Human Capital Index.
- World Development Report.
- World Bank Paper on India’s Poverty
- South Asia Economic Focus (Bi-Annual)
- Groundswell report
Content Source: Livemint