Financing The New Age Infrastructure

Last weekend, during my morning walk, a smart gentleman, in fact an entrepreneur, was talking to me about the role of Banks and FIs in creating infrastructure in India. I said that VCs and angel investors are performing the same role today. They’re in fact doing a better job by participating in the risk unlike the Banks and FIs who make relatively secured investments in physical infra. He vehemently made a point that a VC investing in Flipkart or Snapdeal is certainly not making an infrastructure investment. I however responded by making the following point.

We have dozens of shopping malls on MG Road in Gurgaon. These are infra investments made by builders and real estate developers and they have created a thriving retail industry in Gurgaon. Thousands of retailers open their shops in these malls. People from hundreds of kilometers come to Gurgaon to shop. The Government builds roads and metro network to help people reach these malls. Most of these malls have been funded by Banks and FIs and these are considered sound infra funding deals.

Now consider Snapdeal, it creates an online marketplace, a shopping mall bigger than any brick and mortar mall in the world. VCs invest hundreds of millions of dollars in helping Snapdeal establish, promote and sell goods made in India and from across the world. Snapdeal sells more goods in a month than all the malls in Gurgaon put together.

How different is the investment in Snapdeal from an infrastructure investment in a physical building? Why doesn’t the Govt and the RBI consider investments in virtual malls on par with the investments in large physical markets or office complexes? Why are Banks and FIs not ready to debt fund development of this virtual infra?

The Government is making a big push for Digital India. eBusinesses are making products and services available to cities, towns and villages in India in the most democratic way. The goods you can buy in South Delhi, can be bought at the same time in Jhumri Telaiya. This is the infrastructure at its best and this is what we need in India today. This is what the Government, the Banks and the FIs must be investing in, to promote inclusive growth to build the new India. This is Digital India.

-Rakesh Kapoor