Strategies to raise funds by government and innovative source of funding the public projects with the collaboration with various stakeholders in the Economy. The article published in Free Press Journal.

1. Updated on : Sunday, October 18, 2020, 12:27 AM IST
PPP collaborative models to stimulate economic growth
By R Kannan

COVID-19 was a black swan event and came as a total surprise to the world. Every segment
of the society has been affected, central governments, provincial governments, governments
at the local levels, corporates and individuals. The initial expectation of COVID-19 was that it
would go away soon but it was proven wrong. Based on the experience of the 2008 crisis,
countries inthe world were very fastto announce largestimulus measures, which has ensured
good liquidity in the system. Because of the large stimulus in many countries, in many of the
developed countries in the world, the slide in growth was restricted and short-term pain was
reduced.
Crisis of this order, weaken the finances of all segments of the society. Despite the traditional
streams of finance showing signs of decline, the government has the facility to borrow more
to provide finance to the segments which require the funds and liquidity.
In India, the government was very fast to announce the measures to alleviate the pain. More
than 80 crore of those who are below the poverty line and the farmers were givenfree rations
and cash in the form of grant/direct transfer. A robust stimulus programme was announced
to ensure the viability of MSMEs in India. The measures were also taken to address the issues
in sectors like Banking,NBFCs and Realty.In the latest IMF economic forecast,the expectation
is that the Indian Economy will contract by 10.3 per cent. According to the IMF and many of
the economists/analysts, there is both fiscal and monetary space available to accelerate the
growth rate in India. The economic growth will make many sectors viable, reduce the NPA in
the banking system, create jobs and reduce the need for more concessions from the
government.
The liquidity in the banking system is good and there is no demand for funds from various
sectors, due to poor capacity utilisation. Bringing down the interest rates further, will affect
the profitability of banks,reduce the income of senior citizen investors and reduce the income
for those who are depending on interest income. Further, reducing the interest rate willmake
investments from abroad unattractive.
To make the country recover and be resilient, the estimates are that in the worst-case
scenario, Rs 30 trillion of funds may be required by central and state governments to bridge
the funding gap and they may have to increase the borrowing up to Rs. 30 trillion. The choice
available for the central government to raise funds required from traditional sources is
limited. The two choices,which can be considered are, using the physicalassets availablewith
government/government companies and large borrowing to kick start the economy.
In this crisis, innovative models of financing projects in the economy through a partnership
with various stakeholders will help to reduce the funding through cash and printing more

2. money. The government can collaborate with various stakeholders to kick start economic
growth.
India has one of the good models of the PPP projects and Government / Government
companies can capitalise on the strengths they have in the form of Land and Building in
premier locations. PPP projects are mainly in infrastructure, long gestation and risk-sharing
with the private sector. New models could focus on Resource Sharing, Knowledge Sharing and
Risk sharing. After the COVID-19, sectors like Health care, Education and Community
Development created opportunities for collaboration with the various stakeholders.
The government has already started leasing, operating roads; airports and ports. Now that
the concept of InvITs and Reits have taken off in India, it should be possible to raise a lot of
resources through these instruments.
AtmaNirbar Bharat
This has created a lot of interest among investors from various countries in the world. One of
the main issues is the availability of land with supporting facilities for such projects.
Government and PSUs have a large tract of land and a large number of buildings across the
cities. Few cities were developed because of large PSUs and many of these towns are still
controlled by the large PSUs. Already an institution like NTPC has decided to allow other
companies to operate within its premises. They can use the infrastructure already available
on the campus and in the townships. A list could be made of all such facilities in India, within
a period of one month. These facilities could be offered to MSMEs and those who are putting
up projects under the ANB Programme. The land could be leased, rented or given as equity
for developing joint venture projects. This will reduce the project risk for investors.
One of the issues in setting up a project in India is unexpected delays in commissioning the
project due to obtaining allthe licenses andpermissions required. The government can create
project vehicles for strategic Industries, obtain all the permissions and sell the fully compliant
project vehicle with a good premium. This will be a valuable addition to allotting the bear land
to the Project Developer.
Many of the PSUs are not doing well becausethey are in abusiness,where the business model
has changed and the technology they use is outdated. This has resulted in the sickness of the
PSUs. Most of the PSUs can be turned around overnight. The central and statePSUs have land
and property in large cities, which have a huge value of their properties (Eg: BSNL, MTNL). By
bringing in the best companies in the world in the sectors and creating a JV with them, the
companies can be turned around.
In case, they are in industries which are not promising, capitalisation plan for the land and
buildings could be formulated. Once the capitalisation is done, the government can ensure
the debt repayment, which will reduce the NPAs of banks and government can take the
residual money in the form of dividends.
Public-Private Partnership

3. Within the public sector, the range of performance of companies is varying by a wide margin.
But all of them have good recruitment and training process. They have people with good
capabilities. What some of them lack is market orientation, good pricing strategies and good
investor relationship practices in the case of companies which are doing well. The best
practices from best companies in PSU’s, the private companies in the concerned sector can
be gathered, assimilated and disseminated to PSUs. Since many of them are sick, a turn
around plan can be developed for each sick PSU. Similarly, a forum can be created for sharing
best practices of central PSUs with other PSUs/state PSUs. A leader in a sector can help the
companies in the same sector to improve their policies, systems and procedures. In one of
the large business groups in India, a similar concept was implemented in the year 2001 and
after that many of the companies in the group have started doing very well.
Public Charity Partnership
Temples, mosques, churches and other leading religious institutions in India have very large
fund base and manage a large tract of land and buildings. They also have very high revenue,
many times in hundreds of crores a year. They also manage Schools, Colleges,
Townships,Hospitals and other social infrastructure. After the Pandemic, the importance of
social infrastructure has become very important. Some of these institutions have the best
facilities and best practices. They can be roped in to improve social infrastructure
development in the areas where they are operating. A partnership model could be developed
with the institutions.
Public Community Partnership
India has a very large programme for unemployed, Mahatma Gandhi National Rural
Employment Guarantee programme. A very largebudget is allotted for this programme, every
year.
This year due to COVID-19, the additional amount has been allotted for this programme.
There is aprogramme for capacitybuilding of Panchayatiraj institutions. The capacity building
for Panchayats requires strengthening. They should be able to identify projects, which will be
more beneficial than what is being done now. Focussing on projects, creating value for the
villagewillgo abig way in creating productive assets.Theprojects will be like building schools,
dispensaries and community centres. The focus of this programme going forward could be on
social infrastructure apart from physical infrastructure.
Public MFI Partnership
India is one of the largest recipients of loans from many of the MFIs. They continue to support
India’s Initiatives and bullish on India’s long term Economic Growth. Now all of them
encourage projects which meet ESG norms. This is in synch with our national objective of
environmental friendly Economic growth. The focus for future engagement could be on
Digital technology penetration, broadband penetration, Jobs creation and poverty alleviation
apart from the conventional projects.
Public Foreign Financial Institution Partnership

4. India has become very attractive for long term funds around the world. Especially, after the
stimulus by many of the developed countries in the world, the low yielding funds in the world
have increased. Everybody is looking for investments, where the yields will be enough for
them to meet their investment objectives. JICA, JBIC from Japan and many of the large
Canadian Pension funds have invested large funds in India. Many of the large trading partners
also have made good investments in India and they want to make more investments in India.
Many of them, who are still not in India, not having a manufacturing base are waiting in the
wings. After the new policies for manufacturing in India, there is an increased interest in India
from multinationals around the world. Already many new manufacturing projects were
announced by large multinationals. Many more want to come and set up shop in India.
COVID-19and geopolitics have brought agreat opportunity for India for fulfilling our ambition
of taking the manufacturing GDP to 25 per cent. Through new models of the collaboration of
Government with various stakeholders, India’s infrastructure development targets could be
achieved and India could emerge as the destination of Global manufacturing.
R Kannan is an expert in finance and strategy with more than 35 years’ experience. He has
been associated with TCS, Hinduja Group, ICICI Bank, among others.
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