Financing Economic and Social Infrastructure

Abstract

Abstract Sectoral analysis of private participation in infrastructure shows that most private investment has gone into economic infrastructure (like telecom, power, transport) as compared to social infrastructure (like water supply, health, education). Social infrastructure in India is currently suffering from resource crunch as well as abysmal levels of efficiency. Therefore, the need for private investment may perhaps be greater in these sectors, both in terms of resource augmentation and efficiency improvement. However, the projects in social sectors tend to be small (e.g. the cost of a primary school is much less compared to a power plant), and there may be issues in imposing full-cost-recovery user fees given that many such services (like water supply and primary education) are merit goods. Therefore, they are much less attractive to the private sector. The chapter will focus on challenges in financing social infrastructure and the strategies to overcome them. The Manila Water Company example for water supply, and the numerous education and health PPP projects in Australia and the United Kingdom show that private participation in social infrastructure is possible for mutual benefit to the private and public sectors. Impact investment, importance of environmental, social, and governance (ESG) norms, social stock exchange, and so on will also play a part in popularizing private investment in social infrastructure.