Private sector involvement in public infrastructure faces challenges, impacting both stakeholders and financing institutions. Despite increased budgetary allocations for capital expenditure (capex) since 2020, private investment in capital-intensive industries lags. Sectors like financial services, e-commerce, and tech startups, which contribute significantly to consumption, are less capital-intensive, affecting private capex intentions.
The government’s push for infrastructure spending, primarily through the National Infrastructure Pipeline (NIP), aims to boost economic growth. However, traditional industries show limited investment interest, with infrastructure projects dominating recent capex. Past experiences with public-private partnerships in infrastructure, especially in roads, raise concerns about the sector’s risks and the viability of financing models.
Challenges in project financing skills and asset-liability mismatches have led to NPAs, hindering bank lending to the sector. Alternative funding sources, such as infrastructure NBFCs, bond, and equity markets, also face obstacles. The article explores these challenges and the potential impact on unlocking private sector capex for India’s infrastructure growth