Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
5. What are development finance institutions (DFIs)? Account for the need of DFI to channel funds for infrastructure projects in India. (250 words)
Reference: Live Mint
Why the question:
Finance Minister Nirmala Sitharaman in her July 2019 budget speech. She spoke about the need for a specialist DFI to channel funds to the ₹1 trillion of infrastructure projects planned over the next five years. Ever since there have been calls to consider a new DFI.
Key Demand of the question:
To explain regarding DFI and their role in funding developmental projects and to assess whether India needs DFI 2.0.
Account – Weigh up to what extent something is true. Persuade the reader of your argument by citing relevant research but also remember to point out any flaws and counter- arguments as well. Conclude by stating clearly how far you are in agreement with the original proposition.
Structure of the answer:
Define development finance institutions (DFIs).
In the first part, briefly mention the India’s experience with DFI’s so far.
In the next part, mention the aims and objectives of DFI’s. Give the advantages of having DFI’s fund the infrastructure projects in India and mention some special concessions made for DFI’s to function which make them an interesting choice to fund infra projects. Also mention about, as how DFI’s are more suitable than banks infra financing.
Next, bring out the drawbacks of DFI’s and the why they were converted to universal bank. Suggest steps to overcome those drawbacks to make DFI’s as good alternative to fund Infra projects.
Pass a balanced judgement regarding DFI’s to fund infra projects in India.