The article suggests that there is no financial side constraint on infrastructure in India at present. With a well developed financial market, it is only the lack of good bankable projects that is the limitation, and there is no way another Special Purpose Vehicle (SPV) or Development Finance Institutions (DFI) can overcome this source problem. When interest rates are determined through the market, there is only a limited role for (DFIs). In the era of controls- where the state mobilised and directed much of the savings and resources in the economy- it made sense to set up DFIs which would direct cheap funds from the state to industries and activities of importance. Financial repression, which was possible then through direct action of the state, is now only possible to the extent that some interest rates are controlled. There is a more crucial role for policy and regulatory clarity; for the same to come in sectors, like electricity, water, oil and gas, urban infrastructure is still awaited. The blame for muddling around, therefore, falls squarely on government departments and policy-makers. Risks are far too high for private investments in water and electricity, or even in oil pipelines, which are plagued by under-investments. Elsewhere, there is far too much ad-hocism. The executive of the day has far too much power, so that past contracts are typically not tight enough. And contract adherence vital in infrastructure, especially those involving PFIs of some kind, is a major problem. The deadly embrace created by price-based subsidies in these sectors makes investments all but impossible for private capital. Correction of these aspects would allow the funds to be directed efficiently and in the right places.

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