Long term financing of infrastructure

Abstract

Infrastructure projects, given their long life, require long term financing. The main sources of long term financings are insurance and pension funds who seek long term investments with low credit risk. However, in India household financial savings are mainly invested in bank deposits. Insurance and pension funds account for only a small percentage of household financial savings. In addition most infrastructure projects do not qualify for investment by insurance and pension funds because of the complex risk profiles of these projects. This paper examines the steps taken by the government to enhance the flow of long term financing for infrastructure projects.