Tackling Funding Gaps: Finance Minister Advocates New Mechanism For Urban Infrastructure Investments

Finance Minister Nirmala Sitharaman on Sunday (16 July) underlined the need for embracing innovative strategies to attract private investment, bridge financing gaps and foster sustainable development of infrastructure in cities.

The Minister highlighted the challenges faced in financing infrastructure in cities during the 'G20 Infrastructure Investment Dialogue'.

These challenges have been exacerbated by the tightening of monetary policy in key markets.

The tightening of monetary policy has led to an increase in interest rates and a growing burden of debt repayment. In order to address the funding gaps, there is significant potential in exploring new funding mechanisms for cities.

“It can complement the pool of funds available for infrastructure in addition to public investment and financing provided by Multilateral Development Banks (MDBs),” Sitharaman added.

The Minister also made a case for developing an ecosystem to improve the credit-worthiness of urban local bodies through appropriate policy and regulatory framework.

Cities in a rapidly urbanising world face the urgent challenge of delivering high-quality urban infrastructure.

According to Sitharaman, the current urban population accounts for 55 per cent of the world's total, and this is projected to rise to 68 per cent by 2050.

To accommodate this growth, significant investment in infrastructure will be necessary.

The Minister highlighted that the GIFT International Financial Services Centre (IFSC) has been designated as a special international financial jurisdiction with reliable business regulations and a competitive tax structure that prioritises ease of doing business, as per the ET report.

GIFT IFSC has 400+ registered entities across various business segments, including banking, capital markets, insurance, fintech, aircraft leasing, and bullion exchange, with increasing participation from international and domestic financial institutions.