In a compelling address at the ‘G20 Infrastructure Investment Dialogue,’ Finance Minister Nirmala Sitharaman underscored the criticality of embracing innovative strategies to attract private investment and foster sustainable development of infrastructure in cities. Sitharaman acknowledged the heightened challenges related to financing infrastructure in the wake of tightening monetary policies in key markets, leading to the hardening of interest rates and an escalating burden of debt repayment.
“Innovative financing and funding mechanisms for cities could have significant potential to fill the increasing (funding) gaps. It can complement the pool of funds available for infrastructure in addition to public investment and financing provided by Multilateral Development Banks (MDBs),” said Sitharaman.
She emphasized the necessity of exploring alternate solutions to encourage private sector participation in the infrastructure development context. Sitharaman highlighted various innovative financing instruments that could play a crucial role, including blended finance, structured project finance, securitization, thematic bonds, biodiversity offerings, and local currency finance.
The minister stressed the importance of building a supportive ecosystem to enhance the creditworthiness of urban local bodies through appropriate policy and regulatory frameworks. Recognizing the far-reaching impact of investment decisions on the future of cities and the quality of life for future generations, Sitharaman called for comprehensive efforts to prioritize sustainable urban infrastructure development.
Addressing the challenges of a rapidly urbanizing world, the minister highlighted that over 55% of the global population currently resides in urban areas, and this figure is projected to increase to 68% by 2050. Meeting this growth demands massive investments in infrastructure to accommodate the burgeoning urban population.
Sitharaman also discussed the GIFT International Financial Services Centre (IFSC), which has been designated as a special international financial jurisdiction with trusted business regulations and a competitive tax structure focused on ease of doing business.
She informed the gathering that GIFT IFSC already boasts more than 400 registered entities across various business segments, showcasing healthy and increasing participation from both international and domestic financial institutions.
The finance minister’s call for innovative financing comes as a timely and crucial initiative to accelerate infrastructure development, attract private investment, and bolster economic growth in India and beyond.