Infrastructure spend in 12th plan to fall 30 per cent short: Pranab

India's ambitious target of Rs41 lakh crore investment in key infrastructure in the 12th plan period (2012-17) is likely to face a funding shortfall of around 30 per cent or Rs12,30,000 crore, finance minister Pranab Mukherjee has said.

''While I am hopeful of meeting the target for 11th plan investment, as per our estimates, there may be a substantial gap of around 30 per cent in financing the even more ambitious target of Rs.41 lakh crore of investment in infrastructure for the 12th plan period,'' Mukherjee told the parliamentary consultative committee attached to his ministry on Tuesday.

He said the fundamental constraint in financing infrastructure relates to the limits on banks' lending to the sector due to asset-liability mismatch. The funds are required for 14-15 years, but deposits are of shorter maturity. "Increasingly, therefore, we would need to rely upon intermediating greater amounts of insurance and pension funds into infrastructure," said Mukherjee, according to an official statement today. 

He called for strengthening the corporate bond market and developing credit enhancement mechanisms for accessing long term funds available with insurance and pension funds. 

India is heavily dependent on banks to fund its infrastructure projects. The bonds market is largely untapped as India's stock of listed non-public sector debt is estimated at a meagre 2 per cent of GDP. A robust corporate bond market can help banks address their asset-liability mismatches and bridge the financing gap. 

Mukherjee said regulatory changes were needed to attract more foreign capital, especially debt capital, to fund infrastructure projects in the country. He also highlighted the need to strengthen the corporate bond market and develop credit enhancement mechanisms to enable infrastructure projects, typically non-recourse special purpose vehicles, to access long-term funds from insurance and pension funds.