India's local govt reforms lead to emerging market model

Mumbai, Apr 16: The Indian government's recent initiatives to develop infrastructure plans and reform local governments have ushered the country into an emerging market model for infrastructure finance and a more sophisticated domestic bond market, says a report by Fitch Ratings.

''There are hopeful signs that India will become an emerging market model for both the decentralisation of governmental responsibility as well as for the creation of sustainable financing for infrastructure projects, avers Fitch's Managing Director and Head of International Public Finance (Japan and Asia-Pacific) William Streeter in a special report titled 'India's Public Finance Outlook: Towards an Emerging Market Model'.

The report says the Indian government's infrastructure development plans and local government reforms provide a ''very supportive platform'' for these efforts.

''Some of these measures include financial incentives to local governments for participating in the reforms,'' it adds.

However, it chastises the government for slow implementation of these reforms.

Another point highlighted in the report refers to the recent financing experiments by several key Indian states, using a variety of pooled and conduit financing techniques through state-owned corporations which, the rating agency observes ''hold much promise as prototypes for the sustainable financing of infrastructure projects in India.'' According to Fitch India Associate Director N Raju, ''If these financing structures are adopted properly by more states, they will also promote diversification of India's domestic bond market.'' A few of the larger cities and local government corporations have also begun entering the bond market on a stand-alone basis, he adds.

UNI