17th March 2023 (6 Topics)
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Betting on National Champions
Context:
- Although it is believed that a developed country must have a good infrastructure and better facilities, but it cannot be the sole solution to fulfil the growth aspirations of developing country like India as it still needs much to get implemented via ‘National Champions model’.
Issues to manage Infrastructure:
- The biggest constraints: One, it needs to be built to a minimum scale, which makes it expensive.
- Less Private participation: It is often seen as a public good component which makes the social value of infrastructure higher than its private value to individual users, hence attracts less private players.
- Finances dependent on government: The traditional approach to financing infrastructure has thus relied on tax revenues or government borrowing. But this introduces elements of a vicious trap.
Measures to be adopted:
- Incentivise the sector: To increase the private sector participation there is a need to provide targeted subsidies for infrastructure investments.
- Involving Credit facilities: There must be involvement of access to credit from public sector banks for infrastructure projects, as a priority sector lending.
- Incentivise private giant companies: As the Infrastructure projects needs a slow return over time, private giants can act as shock absorbers in the sector, thus they also needs incentives.
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