India’s PPP journey and the road ahead

As infrastructure spending accelerates, public-private partnerships will drive growth and jobs only if risks are allocated and managed prudently

- V RAVI ANSHUMAN SRUITH MOHANAN

INFRASTRUCTURE INVESTMENTS ARE not only a prime driver of future GDP growth, but also generators of significant rural employment.

A recent Morgan Stanley report estimates a total investment of around $1.5 trillion (₹130 lakh crores) in the infrastructure space over 2024-2029. Prime Minister Narendra Modi has also reiterated the criticality of a strong infrastructure backbone towards the realisation of our Viksit Bharat 2047 goal. During the last decade or so, there has been a significant thrust in using the Public Private Partnership (PPP) business model in the infrastructure space as it eases fiscal constraints that governments face while also delivering the private sector’s managerial efficiency and customer service.

However, ill-designed infrastructure investments are a recipe for future crisis. Below, we outline a set of recent policy reforms that have sought to mitigate many of these risks by facilitating optimal risk allocation, improving administrative efficacy, fostering greater capital formation for infrastructure investments and effectively leveraging technology.

Acquisition of land and obtaining environmental clearances are challenging in the Indian ecosystem where interests of diverse stakeholders must be delicately balanced. However, recent modifications in model PPP concession agreements place the onus of obtaining these approvals on the government, the entity most suited for managing this approval risk. As these approvals are specified as conditions precedent, the private sponsor is shielded from this risk.