India must tap state, city financing for infrastructure push: ADB

India's ambitious infrastructure development agenda will require a fundamental shift in how projects are financed, with state and city governments playing a far more central role than at present, according to senior officials at the Asian Development Bank.

Bhargav Dasgupta, a senior economist at the multilateral lender, highlighted that India faces an estimated $840-billion funding requirement for urban infrastructure over the coming years. This substantial gap cannot be bridged by central government budgets alone, necessitating a decentralized approach to project financing and implementation.

The shift towards sub-national financing is critical to unlocking larger pools of private capital that have remained largely untapped at the state and municipal levels. Cities and states possess considerable assets, revenue streams, and borrowing capacity that remain underutilized, according to development experts.

Currently, India's infrastructure financing remains heavily concentrated at the central level, with state and city governments dependent on budgetary allocations and limited direct access to capital markets. Experts argue that strengthening the financial capacity and creditworthiness of these sub-national entities would enable them to raise bonds, tap institutional investors, and structure public-private partnerships more effectively.

The ADB's assessment underscores the need for policy reforms to enable states and municipalities to access credit markets, improve their financial management systems, and develop bankable urban infrastructure projects that can attract institutional investment.