Context: The government needs to push for the corporate bond market and credit guarantee mechanism in order to boost investment and demand.
Recommended steps:
Policy induced Insurance & pension Funds: to invest bonds issued to fund viable infrastructure projects.
Creating a Corporate Bond Market: Money raised from RBI through it can then be used by State owned vehicles to invest in corporate NBFC bonds to finance infrastructure bonds. This would also encourage foreign investors.
Reduce Taxes: eliminate Transaction Taxes, and burden of stamp duty be minimal and uniform across states.
Discourage bank funding for long gestation projects: it leads to routine asset liability mismatches.
Operationalize Credit Guarantee Enhancement Corporation: it can free up about Rs 3.5 lakh crore of bank exposure to the infrastructure sector.