Financing Infrastructure in India: Macroeconomic Lessons and Emerging Market Case Studies

By James P Walsh, Jiangyan Yu, Chanho Park

August 1, 2011

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James P Walsh, Jiangyan Yu, and Chanho Park. Financing Infrastructure in India: Macroeconomic Lessons and Emerging Market Case Studies, (USA: International Monetary Fund, 2011) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Driving infrastructure development, notably mobilizing financial resources for infrastructure projects, has been challenging in many countries. This study includes two parts: an empirical analysis of macroeconomic risks associated with infrastructure booms, and a case study of four emerging economies about their practice of funding infrastructure development. The study shows that (i) there is no empirical evidence that rapid infrastructure growth would undermine contemporary macroeconomic performance, implying that room is created to accommodate infrastructure booms without compromising fiscal and external sustainability; (ii) banks may play an important role in financing infrastructure, but caution is needed to avoid directed lending and regulatory forbearance that the authorities may use to promote financing; (iii) capital market development is important to accommodate the usually high financing needs, and encouraging private investors to move into infrastructure would require regulatory and institutional improvements; and (iv) public support, including credit guarantees, may help bolster investors' confidence, but the authorities should carefully monitor and manage fiscal risks.

Subject: Bonds, Commodities, Electricity, Expenditure, Financial institutions, Financial markets, Infrastructure, National accounts, Public investment and public-private partnerships (PPP), Securities markets

Keywords: Bank, Bonds, Capital market, Chile, Corporate bond market, Electricity, Financial support, Fixed income, Global, Growth, Infrastructure, Infrastructure financing, Infrastructure investment, Investment, Market, North America, Ordinary shares, Policy bank, Preferred shares, Private equity, Public investment and public-private partnerships (PPP), Public-private partnership, Securities markets, South America, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/181
Stock No:

WPIEA2011181
ISBN:

9781462310296
ISSN:

1018-5941

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