As expected this report comes out after NURM
Indian infrastructure financing needs municipal bonds
To fund projects under the prestigious Jawaharlal Nehru National Urban
Renewal Mission (NURM), CRISIL estimates that India's municipal bodies will
need to invest about Rs.300 billion over the next seven years. For
municipalities that are short of funds even for routine projects, this may
seem an ambitious target indeed. However, a study by CRISIL concludes that,
with appropriate funding (backed up by good revenue management), the
challenge is far from insurmountable.
The study shows that accessing the municipal bond market will be the key
enabler in allowing municipal corporations to provide better infrastructure
facilities and services. Municipal bonds are the most effective funding
options for urban local bodies: the tenure of these bonds is long, matching
the payback on municipal projects, and they provide a wide investor base.
Additionally, the nature of these instruments encourages much-needed
institutional strengthening. Added to this is the fact that, in the Indian
context, the credit risk profiles of most municipal corporations are
superior to those of the respective state governments. Therefore, these
corporations have an opportunity to access market funds for infrastructure
development at low interest rates and based on their standalone profiles.
**
CRISIL believes that the 35 cities with populations in excess of 1 million
are likely to see urbanisation growth and infrastructure spending higher
than the national average. Given the magnitude of urban infrastructure
investment needed over the next seven years, CRISIL believes that the Indian
municipal bonds market is poised for exciting growth. According to Ms.
Roopa Kudva, Executive Director and Chief Rating Officer, CRISIL, "The rapid
economic growth that has created the need for infrastructure will also widen
the funding options available to municipalities. We believe the municipal
bond market offers huge, unexploited potential, for meeting the funding
needs of Indian municipalities. The revival of this market is necessary if
we are to bridge the infrastructure financing gap and sustain the economic
growth that we are seeing today."
* *
*Sourced From: CRISIL Limited*
Indian infrastructure financing needs municipal bonds
To fund projects under the prestigious Jawaharlal Nehru National Urban
Renewal Mission (NURM), CRISIL estimates that India's municipal bodies will
need to invest about Rs.300 billion over the next seven years. For
municipalities that are short of funds even for routine projects, this may
seem an ambitious target indeed. However, a study by CRISIL concludes that,
with appropriate funding (backed up by good revenue management), the
challenge is far from insurmountable.
The study shows that accessing the municipal bond market will be the key
enabler in allowing municipal corporations to provide better infrastructure
facilities and services. Municipal bonds are the most effective funding
options for urban local bodies: the tenure of these bonds is long, matching
the payback on municipal projects, and they provide a wide investor base.
Additionally, the nature of these instruments encourages much-needed
institutional strengthening. Added to this is the fact that, in the Indian
context, the credit risk profiles of most municipal corporations are
superior to those of the respective state governments. Therefore, these
corporations have an opportunity to access market funds for infrastructure
development at low interest rates and based on their standalone profiles.
**
CRISIL believes that the 35 cities with populations in excess of 1 million
are likely to see urbanisation growth and infrastructure spending higher
than the national average. Given the magnitude of urban infrastructure
investment needed over the next seven years, CRISIL believes that the Indian
municipal bonds market is poised for exciting growth. According to Ms.
Roopa Kudva, Executive Director and Chief Rating Officer, CRISIL, "The rapid
economic growth that has created the need for infrastructure will also widen
the funding options available to municipalities. We believe the municipal
bond market offers huge, unexploited potential, for meeting the funding
needs of Indian municipalities. The revival of this market is necessary if
we are to bridge the infrastructure financing gap and sustain the economic
growth that we are seeing today."
* *
*Sourced From: CRISIL Limited*