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2) Private sector investment in infrastructure is facing several headwinds. Analyze and also suggest solutions to pick up private sector investment?(250 words)

Topic – Indian Economy and issues relating to mobilization of resources

2) Private sector investment in infrastructure is facing several headwinds. Analyze and also suggest solutions to pick up private sector investment?(250 words)

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Why this question

The article discusses the contribution made by private sector, both in terms of capital and enterprise, in boosting India’s infrastructure sector. Thereafter, it delves into the problems plaguing private investment and potential solutions. At a time when economy is struggling to pick up the pace of private sector investment, the role of private sector capital in developing infrastructure needs attention.

Key demand of the question

The question expects us to first discuss the role played by private sector in developing India’s infrastructure, and highlight the headwind in the form of challenges they are facing. Basically we need to explain why very few bids have come from private sector in PPP projects and discuss potential solutions and way forward.

Directive word

Analyze – When asked to analyze, you  have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary.

Structure of the answer

Introduction – bring out the status quo that private sector contributed an estimated ₹20 trillion, or a third of India’s ₹60 trillion infrastructure investment, between fiscals 2008 and 2017. However, it has declined sharply in recent years in terms of share of investment, from 37-38% to below 25% in fiscal 2018.

Body

  • Bring out the role played by private sector in developing airports, roads etc. Explain how this was done through PPP model
  • Thereafter bring the headwinds in front of private sector – cost and time overruns leading to NPA problem, issues with risk sharing in the previous model of PPP etc
  • Discuss potential solutions such as the introduction of hybrid annuity model etc. Bring out potential risks as well.

Conclusion – Give your view on the role and need of private sector in infrastructure sector and discuss the way forward.