Research Spotlight: Innovative financing for India’s infrastructure

Highway marker on India's SH 17In a study titled “Complementing Economic Advances in India: A New Approach in Financing Infrastructure Projects,” SMU Finance Professor Andrew Chen and co-author Jennifer Warren Kubik have proposed an innovative solution to improving India’s infrastructure that has significant implications for capital markets and development. “For India to continue growth on a sustainable path, investment in infrastructure is critical. Infrastructure bottlenecks are seen as one of the leading obstacles for India in realizing its economic growth potential,” the authors say. Yet such development could cost the Indian government as much as $500 billion and will require substantial financing. Chen and Kubik suggest approaching the problem by raising capital through initial public offerings (IPOs) and securitizations globally. This approach, coupled with financial innovations, could help smooth the frictions which lay at the root of India’s infrastructure development problems, the authors add. “Infrastructure spending in India is particularly politicized and could gain efficiencies through the benefits of global capital markets rather than at the hands of political agendas,” they write. Read the executive summary at the Cox School of Business’ faculty research site.

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