FinMin pins hope on global pension funds to buy into India’s infra play : 19-02-2020

Global pension funds with $40 trillion of assets under management will now look at India’s infrastructure sector more favourably because of the elimination of dividend distribution tax (DDT), senior officials in the finance ministry said.

Pension funds, insurance funds and sovereign wealth funds invest in the long term and wish to earn through dividends rather than capital gains, the officials said, adding that the elimination of DDT would make it more attractive for such investors to invest in the country’s infrastructure sector.

“Not only foreign funds, but also local pension funds. They all will be enthused to invest in projects where they will get long-term dividends, which typically include infrastructure projects. We expect them to be a major contributor for the infrastructure pipeline,” K Rajaraman, additional secretary in the Department of Economic Affairs, told ET when asked how the budget would step up the flow of funds into infrastructure.

Rajaraman was part of a finance ministry team led by minister Nirmala Sitharaman that visited Bengaluru on Monday and interacted with local business people.

Officials said the Rs. 22,000 crore earmarked in the budget as equity support to National Investment and Infrastructure Fund (NIIF) and India Infrastructure Finance Company (IIFCL) could be leveraged eight to nine times. “That again is an instrument which will provide both equity and debt capital for infrastructure and catalyse the private investor,” said one of the officials.

The NIIF, they added, has got Rs. 7,000 crore of contributions from global pension funds channelled into projects. It has so far raised a total of Rs. 10,000 crore — Rs. 3,000 crore directly and Rs. 7,000 crore through partners.

According to them, funds for infrastructure projects would flow not only from the union budget, which they said was only a catalyst for a lot of capital expenditure. “The real number to watch is Rs. 103 lakh crore of the National Infrastructure Pipeline (which the finance minister launched on December 31),” said an official. It consists of funds partly from the central government, partly from states, and partly from private sources. The budget, they said, contained specific provisions to catalyse funding for the National Infrastructure Pipeline of more than 6,500 projects across sectors.

As for other sources of financing, Rajaraman said, the bond market was going to be a major one. “We also expect foreign direct investors and foreign portfolio investors to invest substantially,” he said, adding: “The activity of foreign investors, especially in brownfield assets, is quite significant, enabling the local developers holding brownfield assets to reinvest in greenfield projects.” According to him, the 100% tax exemption granted to sovereign wealth funds of foreign governments on interest, dividend and capital gains would also spur investment in infrastructure.

Source : PTI