Noting that last year fund inflows from all traditional channels of FDIs, ECBs, FIIs and domestic capital was way below USD 200 billion, he said that government, planners and the industry would have to find alternate sources for this huge amount to finance growth.
"If the economy is to grow at 7 percent, given a nominal inflation of 5-7 percent, and a credit-to-GDP multiple of 1.3 percent, the average growth rate in financing will have to be 18 percent. In terms of numbers it comes to USD 800 billion per year," he said at the Vibrant Gujarat Summit.
While USD 130 billion came from domestic financial institutions and banks, USD 13.4 billion came from foreign institutional investors, FDI was worth USD 21.6 billion and USD 32 billion came through the ECB route, he said.

He said debt inflows through FPIs is in the range of minus USD 4.6 billion last year and the highest was USD 9 billion in FY 2012. "So, that is something that we cannot depend on," he said.

He also said that against an annual requirement of USD 800 billion net foreign institutional investments and net FDI investments were only about USD 35 billion last year. The ECB component was USD 32 billion.

"Put together, we had about USD 70 billion dollar coming into the country. There is a huge gap in financing and going by this figure, I would think we cannot solely depend on FDI and FPIs for funds but we will have to develop internal sources of funding) and that's where the challenge is," he said.

Noting that the best way to fill this huge gap is increasing the domestic savings rate which came down from a high 35 percent in FY 2011 to 30 percent last fiscal, he said given the current state of the economy, it would be a challenge.

He also noted that developing a vibrant corporate bond debt market can come as big help to fill the gap, which is only a 1.6 percent of present requirement.

Giving numbers in other economies where it is much higher -- 38 percent in South Korea, 20 percent in the US and 17 percent in Japan from corporate bonds -- Adia said.

“We need to develop the corporate bond market". He said that the third option is developing specialised financial instruments like infrastructure financing instruments. There are institutions which are specially meant for infrastructure financing, he added.
There is a need for an India Infrastructure Finance Company so that all infrastructure projects could be scrutinised and funded by it.

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