Govt considers setting up bank with $13.7 billion equity capital

The Central government of India is considering setting up a new bank to fund infrastructure projects across road, port, airport and power sectors as the Union government aims to lift Asia's third-largest economy out from the ongoing recession. The new entity will be a part of the coming budget announcement and is likely to have an equity capital of ₹1 trillion ($13.7 billion). The existing India Infrastructure Finance Co., which has a 20-billion-rupee corpus, will be merged with the bank. Initially, the institution will be funded by the government, which will later invite investors and would be on the lines of state-run National Investment and Infrastructure Fund Ltd., which counts the Canada Pension Plan Investment Board, Asian Development Bank and Abu Dhabi Investment Authority among its investors. The finance ministry has prepared a blueprint for the Cabinet to take a call on the proposal. India faces the challenge of boosting spending on productive assets that aid economic growth after being forced to direct the bulk of stimulus last year on the poor and the farmers to protect them from a pandemic-induced slowdown. In such an arrangement, the spending should be directed on infrastructure, rather than populist measures, to cushion the economy headed for the deepest slump among emerging nations. Attracting foreign investment is also crucial to meet the PM's goal of spending $1.5 trillion on new roads, rail links and other infrastructure projects over the next five years as public finances deteriorate.