Financing Infrastructure in India: Macroeconomic Lessons and Emerging Market Case Studies

33 Pages Posted: 16 Aug 2011

See all articles by James P. Walsh

James P. Walsh

International Monetary Fund (IMF)

Chanho Park

Bank of Korea-International Department

Jiangyan Yu

International Monetary Fund (IMF)

Date Written: August 2011

Abstract

Driving infrastructure development, notably mobilizing financial resources for infrastructure projects, has been challenging in many countries. This study includes two parts: an empirical analysis of macroeconomic risks associated with infrastructure booms, and a case study of four emerging economies about their practice of funding infrastructure development. The study shows that (i) there is no empirical evidence that rapid infrastructure growth would undermine contemporary macroeconomic performance, implying that room is created to accommodate infrastructure booms without compromising fiscal and external sustainability; (ii) banks may play an important role in financing infrastructure, but caution is needed to avoid directed lending and regulatory forbearance that the authorities may use to promote financing; (iii) capital market development is important to accommodate the usually high financing needs, and encouraging private investors to move into infrastructure would require regulatory and institutional improvements; and (iv) public support, including credit guarantees, may help bolster investors’ confidence, but the authorities should carefully monitor and manage fiscal risks.

Suggested Citation

Walsh, James P. and Park, Chanho and Yu, Jiangyan, Financing Infrastructure in India: Macroeconomic Lessons and Emerging Market Case Studies (August 2011). IMF Working Papers, Vol. , pp. 1-32, 2011. Available at SSRN: https://ssrn.com/abstract=1910484

James P. Walsh

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Chanho Park

Bank of Korea-International Department ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Jiangyan Yu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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