View: NMP is an idea whose time has come

The year 2020 has been a watershed one: a once-in-a-century global pandemic ravaged lives and livelihood at a scale that our generation has not witnessed. India’s approach to tackling the pandemic involved – a lockdown to save lives by buying time to establish health infrastructure and disseminate critical information, and then a gradual re-opening, supported by fiscal, compliance, regulatory and monetary measures focusing on the most vulnerable citizens and companies while providing flexibility and time to others.The government’s decision to wait and watch prior to going all-in with fiscal stimulus was applauded by markets on Budget Day. The decision has allowed the government to approach this budget with thoughtfulness and a “constructive” approach focused on the future competitiveness of the economy. At the same time, the finance minister has identified financing tools such as monetisation and disinvestment, which will enable India to tap into a vast pool of domestic and international liquidity and improve operational performance of key assets and companies.Several sectors are already witnessing sustained recovery as indicated by high-frequency indicators such as railway tonnage (+9% YoY in December 2020), port cargo movements (+4%), power consumption (+5%), GST collections (a new record at Rs 1.2 trillion in January). This recovery will continue to gain pace as the Covid-19 vaccination programme continues.From the perspective of an infrastructure professional, the 2020-21 budget is an exciting proposition. There is a significant thrust on investment, including a 34% rise in central government capital expenditure. The government will also nudge and incentivise states to spend more of their budget on creation of infrastructure. A dedicated development financial institution (DFI) has been created. We hope the DFI will be able to provide value-added products such as long-term fixed-rate loans at reasonable rates – a product not available at scale in the Indian market. A 15-20 year fixed-rate debt product would allow infrastructure investors such as NIIF to have significant predictability and confidence in acquiring or developing long-term infrastructure assets.The continued focus on asset monetisation and strategic disinvestments is highly commendable. Creation of a National Monetisation Pipeline and its active tracking will offer confidence to investors on the direction and scale of monetisation.Assets such as power transmission lines, airports, ports, railway infrastructure, gas pipelines, warehouses and sports stadia will be part of the pipeline. With the Power Grid Corporation’s Investment Trust draft red herring prospectus (PGCIL InvIts DRHP) having been filed last week, the monetisation programme is live.The combination of a National Infrastructure Pipeline (NIP) for infrastructure building and a National Monetisation Pipeline, for financing the NIP, could lead to a virtuous infrastructure development and recycling cycle at scale. It could resemble and possibly surpass the very successful Australian Asset Recycling Initiative which started in 2014. And with global yields at historic lows, the government should be able to get excellent value for selling assets now and then use the proceeds to build new projects at low interest rate as well.Many aspects of the financial frameworks in India offer confidence to investors and has led to strong FDI inflows into infrastructure and real estate. This budget provides further support to this confidence through several measures. It delivered a positive message by offering tax exemptions to sovereign wealth funds and pension funds for their infrastructure investments over the next few years. It permitted IDFC-NBFCs to raise capital from international institutional investors to increase borrowing options for infrastructure companies and projects. The budget enables debt financing through InvITs and REITs.These measures and many others will be followed with great expectations by infrastructure investors. Perhaps, the greatest positive of all for those investors will be the National Monetisation Pipeline which will enable investors to dedicate resources to prepare for one of the most attractive infrastructure investment markets in the world.(Writer is the CEO of National Investment and Infrastructure Fund)

from Economic Times https://ift.tt/3jcXPHt