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Financing Infrastructure in India: Macroeconomic Lessons and Emerging Market Case Studies

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  • Mr. James P Walsh
  • Jiangyan Yu
  • Mr. Chanho Park

Abstract

Driving infrastructure development, notably mobilizing financial resources for infrastructure projects, has been challenging in many countries. This study includes two parts: an empirical analysis of macroeconomic risks associated with infrastructure booms, and a case study of four emerging economies about their practice of funding infrastructure development. The study shows that (i) there is no empirical evidence that rapid infrastructure growth would undermine contemporary macroeconomic performance, implying that room is created to accommodate infrastructure booms without compromising fiscal and external sustainability; (ii) banks may play an important role in financing infrastructure, but caution is needed to avoid directed lending and regulatory forbearance that the authorities may use to promote financing; (iii) capital market development is important to accommodate the usually high financing needs, and encouraging private investors to move into infrastructure would require regulatory and institutional improvements; and (iv) public support, including credit guarantees, may help bolster investors' confidence, but the authorities should carefully monitor and manage fiscal risks.

Suggested Citation

  • Mr. James P Walsh & Jiangyan Yu & Mr. Chanho Park, 2011. "Financing Infrastructure in India: Macroeconomic Lessons and Emerging Market Case Studies," IMF Working Papers 2011/181, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2011/181
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    References listed on IDEAS

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    Cited by:

    1. Inderst, Georg & Stewart, Fiona, 2014. "Institutional Investment in Infrastructure in Emerging Markets and Developing Economies," MPRA Paper 62522, University Library of Munich, Germany.
    2. Justin Yifu Lin & Doerte Doemeland, 2012. "Beyond Keynesianism: Global Infrastructure Investments In Times Of Crisis," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-29.
    3. Hiren Maniar, 2013. "Scenario of Viability Gap Funding (VGF) Concept in Indian Infrastructure Projects," Journal of Infrastructure Development, India Development Foundation, vol. 5(1), pages 33-65, June.
    4. Timilsina,Govinda R. & Sahoo,Pravakar & Dash,Ranjan Kumar, 2022. "Why Do Indian States Differ in Their Infrastructure Development ?," Policy Research Working Paper Series 10086, The World Bank.
    5. Ding Ding & Mr. Waikei R Lam & Mr. Shanaka J Peiris, 2014. "Future of Asia’s Finance: How Can it Meet Challenges of Demographic Change and Infrastructure Needs?," IMF Working Papers 2014/126, International Monetary Fund.

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