Funding Infrastructure growth in India
“India requires Rupees 2,00,000 crores of Investment in Infrastructure”, proclaims Businessworld to “grow its GDP at 11%” and further asks “where will all this money come from ?”
Infrastructure Funding Idea No.1
Tap the Pension bill.
I am not talking about the holy cow of pension Funds. The Government of India has decided to dispense with the perquisite of paying pension to its superannuated (in common parlance “retired”) employees who have joined Government service since 2004. To repeat myself, it means that those appointed in government service after 2004 will not be eligible for pension when they retire. Back of envelope calculations at an average age of 28 per recruit and 58 as the superannuating age reveal a lead time of 30 years.
Circa 2035, the Government of India is likely to begin saving on its pension costs. Can we monetise that saving Now ???
If the Government can float bonds of duration in excess of 30 years planning for its repayment out of the savings of Pension-not-required-to-be-paid, we can effectively monetise such savings right away into the Infrastructure sector.
Most infrastructure projects have payback periods at about 30 years or less while even large infrastructure projects can be completed within 30 years (excluding the National River-interlinking project). Moreover, the beneficial effects of the massive Infrastrucure spend is likely to result in manifold increase in tax revenue which will also prove useful in servicing/paying off the bonds.
Do you have any such Funding idea ??
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