Financing For Infrastructure Projects

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Covid Challenges On Financing For Infrastructure
Projects

• The novel Coronavirus that originated from a
  small place in China, has resulted in disruption
  in the everyday routine all over the globe. As
  per the recent data, it has claimed the lives of
  about 12 lakhs people of all age groups. It has
  also had a disturbing effect on all aspects of
  our life. A country like India with a developing
  economy has been one of the worst afflicted
  during these difficult times. This has also made
  it difficult to procure financing for
  infrastructure projects. 

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• An increasing rate of unemployment, along with
  the unexpected recession, could be observed due
  to the lockdown that has lasted for over three
  months. This increase in unemployment has been
  there mostly in the unorganized sectors due to
  the discontinuation of transport services,
  termination of government services, and closing
  down of factories. The financial relations
  between countries around the world have been
  affected due to the growing stress of managing
  social and economic problems that have occurred
  due to the pandemic. A similar situation was
  observed in Africa during the outbreak of the
  Ebola Virus.
• The labor class has been the worst affected in
  terms of employment. Numerous industries have
  been facing a shortage of workers due to the halt
  in public transportation services etc. It has
  also resulted in hassles in obtaining financing
  for infrastructure projects.

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Impact on the infrastructure sector

• The infrastructure sector in India, which is
  infamous for delayed projects and over the top
  expenses for projects, has been badly stirred by
  this pandemic. To provide employment and have
  stable growth, industries need to have adequate
  resources such as power supply, transportation
  facilities, digital connectivity, etc. The
  shortage in demand has further added to the
  troubles of many sectors. Along with this, there
  is a lack of resources with the government for
  providing direct funds for infrastructure
  projects. Hence the pandemic has led to
  unexpected challenges for the industrial sector.

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• The impending challenge for the people working in
  the construction sector is managing the working
  capital. Due to the hindrance in operation
  because of quarantine, many contractors have not
  yet received their dues. Most sectors of the
  economy are also experiencing a delay in
  milestone-based payments due to this crisis.
• The government needs to understand that the
  development in the economy goes hand in hand with
  infrastructure development by providing financing
  for infrastructure projects. Many developed
  countries have experienced a growth in GDP by
  investing in the infrastructure areas. It helps
  to provide support to economies in situations of
  financial crises.

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• The government has started to work on its vision
  to create a national infrastructure pipeline. It
  has planned for investment of about 100 lakh
  crores in the infrastructure sector in its
  five-year development project. Along with this,
  many highway projects with a budget of over 15
  lakh crores have been initiated to make roads
  more accessible. Once these projects have been
  completed, one can expect growth in almost every
  aspect that enhances India's economy.

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Impact on the non-banking financing sector ( NBFC
)

• The self-employed borrowers in the retail area
  are usually given preference for funding by the
  non-banking financial sectors compared to the
  salaried professionals. In the current times
  where Covid has adversely affected the economic
  sector, an increase in credit risk is likely to
  be experienced by the businesses. It can lead to
  a lack of alternative funding options as their
  credit score might not be enough to meet the
  banks' requirements. These NBFCs have shifted
  their focus on collection in the current
  situation of economic crises. It could pose as a
  significant challenge to meet up with the loan
  obligations when the cash flow would be reduced.

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• Hence it would be beneficial if the government
  secures the economy by being prepared for the
  worst by providing financing for infrastructure
  projects, which would prevent such a situation of
  economic crises from arising again. The
  disruption in the economic scenario impacts all
  types of financial organizations along with the
  people associated with it such as  lenders and
  shareholders. Even private developers are facing
  a scarcity of funds to finance infrastructure
  projects. Thus, a comprehensive action plan and
  the government's sincere efforts in
  providing financing for infrastructure
  projects can act as a savior for the economy.

Orignal Source - https//www.resurgentindia.com/co
vid-challenges-on-financing-for-infrastructure-pro
jects