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HomeIndiaGovernanceHow diaspora can help fund India’s infrastructure needs — 'patriotic discount on bonds,...

How diaspora can help fund India’s infrastructure needs — ‘patriotic discount on bonds, remittances’ 

A blog post on Asian Development Bank says diaspora can help fund developmental projects. It adds that for this, the country should make policies to earn the diaspora’s trust.

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New Delhi: Diaspora’s investment could be a strong potential source of financing for India and other Asian countries’ infrastructure and development needs, according to economists at the Asian Development Bank. 

In an ADB blog post published Thursday, their economists Guntur Sugiyarto and Dewan Anas Mushtaq argued that while developing countries in Asia needed massive infrastructure investment of about $1.2 trillion (Rs 98 lakh crore) to $2.1 trillion (Rs 173 lakh crore), their limited budgets wouldn’t allow it.

The financial issues of developing countries in Asia were many ranging from low tax revenue to “unprecedented public debt levels” — according to the blog, tax revenue in these countries was less than 15 per cent of their Gross Domestic Product (GDP). For instance, the tax revenue in 2022 for India was 12 per cent and for Pakistan was 10 per cent, according to the blog.

The economists also stated that according to the World Bank, the total external debt of low- and middle-income countries doubled over the last decade, reaching $9 trillion (Rs 742 lakh crore) in 2021.

“One solution is to tap the countries’ vast global diaspora for financing. Available information on people from Asia living outside their home countries, especially those in the United States and the United Kingdom indicates that much of the population is skilled, well-educated, and earns a good income. This strongly suggested that they can provide talent and capital to help infrastructure development in their home countries,” the authors said.

They added that the diaspora investment potential for Commonwealth countries was approximately $73.2 billion (Rs 6.03 lakh crore) annually and that these huge numbers couldn’t be ignored. For India, Pakistan, and Bangladesh, the potential amounts were $18.4 billion (Rs 1.51 lakh crore), $4.4 billion (Rs 36 thousand crore), and $3.7 billion (Rs 30.5 thousand crore) a year.


Also Read: Over 200 Indian-origin leaders in 15 countries, report shows impact of country’s diaspora


How it can be done

Economists Sugiyarto and Mushtaq offer a number of solutions such as remittances, issuance of diaspora bonds, and “diaspora financing” to support infrastructure and other developmental projects.

“The significance of remittances to the global economy is also evident because they have consistently dwarfed the amount of official development aid over the last four decades. Moreover, remittance inflows are also the most stable, providing a countercyclical buffer during crises,” the authors say.

Diaspora bonds were already used in some migrant-sending countries including India, which on three separate occasions since 1991 have raised over $35 billion (Rs. 2.88 lakh crore) of capital. These bonds, the economists say, could also be tailored to specific needs and involve a patriotic discount that would be attractive to governments and other investors when diaspora investors are willing to receive a lower return.

“Diaspora financing”, on the other hand, is an innovative market-based financing tool to fund income-generating projects in some countries that many countries could adopt through public and private sector investments and other methods in line with the nature of the infrastructure investment, the authors say.

Countries should make the right policies and also bring trustworthy intermediaries, such as multilateral development banks, to overcome the problems of the diaspora’s lack of trust in institutions and regulatory challenges, the blog says. It adds that developing countries in Asia could use these methods to expand access to the global market and overall production capacity to attain a higher growth trajectory.

(Edited by Uttara Ramaswamy)


Also Read: India’s road infrastructure beginning to look impressive. But it’s a long way from world-class


 

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