Development Financial Institution (DFI) is a Game Changer!

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  • Keen observers of the country’s economy were quite concerned with the trajectory of growth before the pandemic struck where the GDP had slowed down considerably. No sooner the pandemic was declared, and subsequent lockdowns decisively proved to be disastrous for the economy as the contraction witnessed during the fiscal year firmly substantiates. The country’s think-tank led by the Finance Ministry had to put on their thinking hats to come out with an all-encompassing roadmap to not only bring the stuttering economy back on track but also give a fillip to the core sectors to regroup without too many hassles by showing positivity in ensuring the growth takes off afresh.

PC: Anjan Roy

  • Therefore, the Budget proposal for the ensuing year was keenly anticipated as all eyes were on the Finance Minister to announce some path-breaking initiatives intended to revive as well as strengthen the economy battered by the extraordinary circumstances brought about by the pandemic. As suggested by scores of economists and fiscal experts, one of the key areas of thrust had to be infrastructure development which carries inherent opportunities to shore up employment scenarios offering many auxiliary sectors to also complement the catalyst provided by the move. As expected, the Finance Minister did come with an appreciative initiative.
  • Needless to mention, infrastructure development is rightfully touted as India’s highway to prosperity. Note that infrastructure inadequacy translates into a marked disadvantage for industry, raising costs, and reducing competitiveness. In her announcement during the Budget, the Finance Minister proposed to set up a development financial institution (DFI) to deal with the challenge. With the Union Cabinet approving the proposal, the DFI will come into fruition yet again after its initial avatar in earlier times eventually getting morphed into commercial banks like ICICI. Thus, emphasizing the setting up of the DFI model is par for the course move in the present times.

PC: Elets

  • Experiences elsewhere suggest that DFIs, especially in emerging nations where financial markets are not sophisticated enough to meet the full spectrum of development needs, succeed in filling the gap with government support to fund riskier projects requiring long-term investment. The DFI in India will be set up through legislation backed by Rs. 20000 crores of government capital. This foundation is subsequently expected to help raise capital to the tune of Rs. 3 lakh crores from the market over few years. If the envisaged plan rolls on smoothly, expect India’s infrastructure development to surge forward.
  • The Finance Ministry must be aware that ensuring funding will be a relatively easier part. However, the real challenge lies in DFI building the capacity to make the right calls in an uncertain environment compounded by the slow growth witnessed all-around. Though the FM has promised a professional establishment with market-linked pay, it remains to be seen if the government desists micromanaging the institution. Incorporating the technological advancement in the form of digitization to dish out an operating framework for the DFI should be diligently worked by the FM. In doing so, the country’s infrastructure development is bound to change for good.

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Krishna MV
Krishna is a Post Graduate with specialization in English Literature and Human Resource Management, respectively. Having served the Indian Air Force with distinction for 16 years, Armed Forces background definitely played a very major role in shaping as to who & what he is right now. Presently, he is employed as The Administrator of a well known educational institute in Bangalore. He is passionate about sharing thoughts by writing articles on the current affairs / topics with insightful dissection and offering counter / alternate views thrown in for good measure. Also, passionate about Cricket, Music – especially vintage Kannada & Hindi film songs, reading – non-fictional & Self-Help Books, and of course, fitness without compromising on the culinary pleasures.