At some point in 2012 India will unveil the 12th five year plan. There are ambitious (pdf) targets for infrastructure spending for the next half decade. An estimated one trillion dollars is to be spent on building ports, roads and power plants that the country badly needs. Considering the size and population of India, a trillion dollars is a meagre amount. Of course, this is just an aspirational target.
Finding the requisite funds is bound to be a challenge. In the past, ideas around offering investment vehicles to NRI's have been kicked around. Attracting investments in foreign currency hold the risks of rapid outflows and volatility in exchange rates.
How about creating a framework to attract part of remittances for infrastructure? Remittances to India have been relatively unaffected by the global slowdown in the last few years and have been growing steadily. At this point, more than $50 billion is transferred by Indians working abroad.
Some of the funds sent to relatives in India are likely to be invested various asset classes. An efficient investment mechanism, tax holiday on returns and a pitch to the patriotic spirit might help draw a chunk of that money into infrastructure sector. With an aggressive push and a promise of healthy returns, it is not implausible to attract up to a fifth of the $50 billion sent home. That is roughly 0.5 percent of India's total GDP, not an insignificant sum. Sure, the government could inspire confidence in such investments with reforms in land acquisition and making clearances for projects more transparent.
Finding the requisite funds is bound to be a challenge. In the past, ideas around offering investment vehicles to NRI's have been kicked around. Attracting investments in foreign currency hold the risks of rapid outflows and volatility in exchange rates.
How about creating a framework to attract part of remittances for infrastructure? Remittances to India have been relatively unaffected by the global slowdown in the last few years and have been growing steadily. At this point, more than $50 billion is transferred by Indians working abroad.
Some of the funds sent to relatives in India are likely to be invested various asset classes. An efficient investment mechanism, tax holiday on returns and a pitch to the patriotic spirit might help draw a chunk of that money into infrastructure sector. With an aggressive push and a promise of healthy returns, it is not implausible to attract up to a fifth of the $50 billion sent home. That is roughly 0.5 percent of India's total GDP, not an insignificant sum. Sure, the government could inspire confidence in such investments with reforms in land acquisition and making clearances for projects more transparent.
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