By 28 November, 2008

Is the government working to set up a mega multi billion dollar infrastructure fund in India? Apparently the project has the sanction of the World Bank as well which is likely to chip in with a big chunk of around $3 billion for the fund, says a WSJ report.

The report said that the total fund size is yet to be finalised but it is likely to be less than $10 billion in size which would mean almost one third to half of the fund would come from the World Bank. The proposed fund is expected to be managed by state-owned India Infrastructure Finance Co.

This could double World Bank's exposure into India. It already has an annual program of $3 billion investments in the country.

This could also mean a more targeted approach towards building infrastructure in India. However, it could also mean less involvement of World Bank executives in deciding on the investments as that decision shifts to IIFC.

 

If indeed such a fund is being planned it would keep the liquidity tap flowing for the infrastructure sector. IDFC is already in the process of raising funds for the billion dollar plus fund and early this year 3i raised a large Indian infrastructure fund. Blackstone is also believed to be working on an infrastructure fund for India.

Tight credit market has put a squeeze on all forms of lending including that to priority areas like infrastructure. The high rates of interests has also jacked up borrowing costs and delayed some infra projects in the country.

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