Long-term debt markets key to growth, says CII

The Confederation of Indian Industry (CII) has said the key to sustaining the current levels of economic growth is deepening long-term debt markets to facilitate the availability of long-term debt capital for infrastructure projects.

The apex chamber had earlier estimated that India would need $331 billion in the next five years for infrastructure development for the economy to sustain an 8 per cent plus growth trajectory.

At present, the country has only a limited dependency through equity in the domestic capital market to raise funds for infrastructure spending.

India is starving for long-term capital, which is a necessary condition for infrastructure development. Banks and development finance institutions do not currently fund long-term projects due to an asset liability mismatch in the short term.

The solution to this was to deepen the long-term debt markets to enable banks and DFIs to participate in infrastructure financing, the CII said in a statement.

It added that in comparison to equity market, debt markets, especially long-term ones, were not well developed in India. In this context, it urged for reforms to deepen the bonds market in line with the R H Patil Committee Report on "Corporate Bonds and Securitisation".

It also called for the creation of specialised debt funds for infrastructure financing by enabling rupee debt funds, allowing domestic QIBs, committing capital to the corpus of close-ended infrastructure debt capital funds, registering debt funds, with a maximum requirement of 33.33 per cent to be listed as debt securities at par with Sebi-registered venture capital (VC) funds and the same tax treatments on debt funds as VC funds.