fingers once. Moreover, since the
government,givenitsfiscalconser-
vatism, cannotcontinueto under-
writethelossesof banks, thequest
for off-Budgetsources of infrastruc-
turefunding must continue.
It is thishopelessquestthatthe
Budgetspeech’sobsessionwithfin-
ancialmarketsreflects.Theeffortto
coaxequity andbond markets to
contributeto infrastructureinvest-
mentfinancing hasthreecompon-
entsto it. Thefirst is to expand and
makelucrativethe spaceavailableto
financial investors,especially foreign
institutionalinvestors(FIIs)andfor-
eignportfolioinvestors(FPIs).The
Budgetnotesthat“an importantde-
terminantof attractingcross-border
investmentsis availability of invest-
iblestockto the FPIs”.So, it proposes
increasingthe statutorylimitfor for-
eignportfolio investment in a com-
panyfrom24 per centof totalequity
nowto a levelequalto thesectoral
foreigninvestmentlimit. FPIswill
alsobe allowedto subscribeto listed
debtsecuritiesissued by infrastruc-
tureinvestment trustsandrealestate
investmenttrusts. Simultaneously,
the governmenthas askedthe Secur-
itiesandExchange Boardof Indiato
considerraisingthe minimum public
shareholding in listed companies
from25 percentto 35 percentso
thatmoresharesareavailablefor
acquisitionin the equitymarket.
Thesecondis to be lessrigorous
whenassessing thesuitability of a
foreigninvestorto enterandinvest
infinancialmarkets.In the past,the
criteriausedwereaimedat keeping
speculativeandshadyinvestorsout.
Butnowthegovernmentplansto
“rationaliseandstreamline the exist-
ing Know Your Customer (KYC)
normsfor FPIsto make(them)more
investor-friendly withoutcomprom-
isingtheintegrityof cross-border
capitalflows”.
Thetermsof entryare alsoto be
relaxed.Forexample,the Budgethas
reducedthe net owned fundrequire-
mentfor foreigninsurers settingup
operationsin the InternationalFin-
ancialServicesCentre fromRs.5,000
croreto Rs.1,000 crore.
Thethird is to try andmakethe
corporate bondmarket attractive for
investors. Creditguaranteesare to be
provided by establishing a Credit
GuaranteeEnhancementCorpora-
tion.Measures for “deepening mar-
ketsfor corporatebond repos,credit
defaultswaps,etc.,withspecific fo-
cus on infrastructuresector”are to be
putin placeto helpinvestorsshare
andtransferrisk.Marketsare alsoto
be mademoreliquidfor foreignin-
vestorsby permitting“investments
madeby FIIs/FPIsin debtsecurities
issuedby InfrastructureDebtFund-
Non-Banking Finance Companies
(IDF-NBFCs)to be transferred/soldto anydomesticinvestorwithinthe
specified lock-inperiod”.
Thisopensthedoors to short-
termflowsin an areawhereinvest-
mentsarenecessarily long-termin
nature.Thesemeasures areby no
meansnovelon a globalscalenorare
theyexhaustive.Butthefactthat
theyhavebeenlistedsuggeststhat
thegovernmentplansto useevery
trickin thefinancial innovationbook
in its desperatesearch for privatefin-
ancingof infrastructure.
Finance Minister Nirmala
Sitharaman alsoannounced thatthe
governmentwasconsideringorgan-
ising an annual global investors’
meetin India, “usingNational Infra-
structure Investment Fund (NIIF)as
theanchor, to getall three setsof
globalplayers,top industrialists/cor-
poratehonchos,toppension/insur-
ance/sovereignwealth fundsandtop
digitaltechnology/venture funds”to
investin India.
Demandsfor “reforms”at those
meetsare boundto be addedto the
list of measures aimed at attracting
investment.Theideais to placefor-
eignfinance on a parwithforeign
directinvestorswhocanintegrate
India into the global production
valuechain.
To quotetheFinanceMinister:
“It is hightimeIndia notonlygets
integratedintothe globalvaluechain
of production of goodsandservices,
butalsobecomespartof theglobal
financialsystemto mobiliseglobal
savings,mostlyinstitutionalised in
pension, insuranceand sovereign
wealthfunds.”
It is unlikelythatthiseffortto
coaxandcajoleprivatefinanceto
substitutefor thestatein theinfra-
structural area will succeed.
Whether it doesor not,the “reforms”
thatwouldbe adoptedto makeinfra-
structure anattractive optionfor
speculativefinance would resultin
changesinfinancialmarketsthat
hugelyincreasethe quantum of risks,
packagethose risksin opaqueinstru-
mentsandpassthemon to investors
whoareunableto judgetherisks
theyare takingon. Increasedfragil-
ity anda meltdown,ratherthanan
infrastructural boom,are likelyto be
the result. $TATAPOWER’S400 MW MundraPlantin Mumbai,afile picture. The
governmenthas announcedthat it will ensure investmentstotalling Rs.100
lakh crorein infrastructureover itsfive-yearterm. In comparison,the total
Centralbudgetaryexpenditurein 2018-19was Rs.24.6lakh crore, of which just
Rs.3.2lakh crorewas devotedto capital expenditure.
THEHINDUARCHIVES