Centre can raise Rs 95k-crores from infra bonds

Mumbai: As it looks for means to push growth, the government can look at issuing infrastructure bonds via a special purpose vehicle (SPV), which could mop up over Rs 95,000 crore or 0.5 per cent of GDP, says a report.

Even though this will raise the overall public sector borrowing, the market will not react adversely as the money raised will be tied to funding specific needs, economists at Bank of America Merrill Lynch said on Wednesday.

"Infrastructure bonds can be issued by an SPV to fund additional public capex needs, which will boost growth without crowding out private investment," they said in the note, adding the finance minister can comfortably mop up over Rs 95,000 crore from such bonds.

The funds raised thus can flow out of fixed deposit to the SPV if the public buys the bonds, it said, adding this will not have an impact on bank deposits or credit growth.

It will not push up deposit rates either, the economists said, and that a likely jump in deposit rates of up to 0.25 per cent can be "fiscalised".