An interesting article by Rana Kapoor, the head of Yes Bank, a prominent private bank in India.

He says:

  • India needs about ₹87,000 crore (about $13 billion) per year for its water infrastructure financing which is much higher than the current year’s Budget allocated for water, which is at around ₹12,000 crore (about $2 billion). Thus, the role of private investment would be crucial to augment public finances to support a climate-resilient and efficient water infrastructure.
  • Given the steady growth of green bonds in India in the past one year, blue bonds have the potential to bridge this financing gap.

However, there are several challenges that need to be addressed for a blue bond market to thrive in India:

  • First, though India has been seeing increasing private sector participation in the water sector, it is considerably constrained due to lack of viable and bankable projects (owing to pricing issues that do not reflect the true value of water), inadequate infrastructure (such as inefficient metering that hinders proper estimates), as well as, limited reliability and hence, creditworthiness of urban local bodies.
  • Second, at a broader level, as the bond market in India (including green bonds) is not as developed in comparison to economies such as the US, Japan or even China, a huge potential for mobilising private finance still remains untapped.

What does he feel are the possible solutions?

  • Stronger policy support
  • Strengthening of the corporate bond market
  • Innovative financial instruments –
    Innovative mechanisms such as credit enhancement and partial risk guarantees

Read the entire article from here