Who’ll finance Indian infrastructure after the Adani scandal? By Andy Mukherjee, Bloomberg Apr 13, 2023 Please read the whole article here .. https://economictimes.indiatimes.com/news/economy/infrastructure/wholl-finance-indian-infrastructure-after-the-adani-scandal/articleshow/99450418.cms
there’s a palpable nervousness in India about what will happen next.The big question .. How will the country fill the gaping holes in its infrastructure if the sector...loses access to much-needed global financing in the aftermath of the Adani scandal?
Domestic institutions, such as the Life Insurance Corporation of India, are simply not wired to own stuff that produces steady cash flows...... Sheer competitive logic will ensure that financial institutions with low cost of capital and long-term charters emerge as asset-owners.
Diffused ownership would also help depoliticize the sector. .. ...There would be far fewer questions about its (LIC's) conduct if, instead of backing a controversial tycoon, the insurer got behind actual cash-generating assets — both at the project level and when they’re bunched together into investment trusts, as rent-earning bouquets.
Project execution requires entrepreneurial hustle. Asset ownership needs balance-sheet strength. Separating the two will depend crucially on political will. The historically incestuous relationship between India’s big business and government, made worse by the opaque electoral bonds introduced in 2018 by Modi’s party, will have to change radically. If politicians do pull off a clean break (even though it’s against their own interest), the next step may be to prepare the groundwork for an alternative-asset industry.
Prominent Mumbai financiers like Srini Sriniwasan and Rashesh Shah are doing just that. ... the goal is to assemble large, patient pools of capital in which investors will share the risk. This is a far better model for funding long-duration assets than using bank deposits maturing in a couple of years .....In the absence of the right kind of homegrown capital, foreign money is calling the shots.
Meanwhile, workers in the world’s fifth-largest economy may have to put up with bad infrastructure for another generation because the institutions to which they’re making provident-fund and insurance-premium contributions aren’t ready to be asset-owners.
When it comes to infrastructure, India’s 1.4 billion people have only ever known two alternatives: Either the resource-starved government will under-supply, or the private entrepreneur will overcharge. The notion that financial institutions can utilize an individual’s own future wealth to give her a better life at an affordable cost is yet to take hold. And that’s the main reason why infrastructure in the country is such a cesspool of intrigue.