The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has given its approval for raising a total of ₹ 31,300 crore in the financial year 2016-17 and to service the principal and interest against the Extra Budgetary Resources (EBR) of ₹ 16,300 crore by Government of India to augment infrastructure spending.

Out of the EBR of ₹ 31,300 crore, it is proposed to finance the funds to be raised by Power Finance Corporation (PFC), Indian Renewable Energy Development Agency (IREDA), Inland Waterways Authority of India (IWAI), and National Bank for Agriculture and Rural Development (NABARD) by Government of India. This implies that the principal and the interest in respect of the EBR of ₹ 16,300 crore to be raised by PFC, IREDA, IWAI, and NABARD shall be financed by Government of India by making suitable budget provisions in the Demand of respective Ministries/Departments.

The move is intended to supplement the efforts of the Government to improve infrastructure spending and to improve the revenue-capital mix of the expenditure for a more sustainable growth.

Background:

Infrastructure spending is one of the key parameters to judge the sustainability of growth in a country. The proportion of Capital expenditure to the total expenditure is the yardstick to measure this. In line with this approach, an announcement was made in the Budget Speech 2016-17 that in order to augment infrastructure spending further, Government will permit mobilisation of additional finances to the extent of 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority through raising of Bonds during 2016-17.

Extra Budgetary Resources mobilisation approved to support infrastructure spending, with government to service part of issuers' debt via budget provisions. The Cabinet authorised mobilisation of additional Extra Budgetary Resources via bond issuance by specified public institutions and required the Government to service principal and interest for a portion of those issuances by making suitable budget provisions in the Demand of the respective Ministries/Departments, thereby supporting infrastructure spending and improving the revenue-capital mix of public expenditure.