Honorable Union Minister for Finance, Honorable State Ministers for Finance, Secretary DEA, Senior Functionaries of the Central and State Governments, Anant, and other dignitaries who are present in this hall. First of all, my compliments to the DEA for organizing such a comprehensive, wonderfully curated topics. I was just going through various topics which have been given. You must also be wondering that after the program is wrapped up, why there is another session, but you need at the end of the day a banker to write a check, right, for all the initiatives which you have discussed over a two-day period. But I have a small presentation on how this financing for Viksit Bharat is playing out.
Many a time when I travel across the world talking to the investors, the recurring theme which comes is that while the federal government, in their sense the central government, is very clear in their objective in terms of supporting this investment cycle, the diversity of the states — some states very progressive, some states on the way to adopt progressive policies, some of them are lagging behind — this divergence among the states is something what actually troubles a lot of investors. I think this forum gives us an opportunity to flag those concerns from the investors' side, particularly in terms of defining the next investment cycle and how can we really work together to attract the capital pools the country requires.
These numbers probably you know during the course of the various sessions would have been mentioned that if you're looking at Viksit Bharat, India's economy target size by 2047 at $30 trillion, there is a projected capital expenditure of about 150 lakh crores, and this is on the basis of annual capital expenditure moving from current 20 lakh cr to 30 lakh crores. These numbers could be slightly divergent from each other, but broadly the picture emerges that our requirement is about 150 lakh crores. If you take only the next five-year period, we are not looking at 2047. In all, I think if you take the period from FY27 to FY31, and the debt component of that would be around 85 lakh. It is broadly coming from the picture that the center and state government together is spending about 16 to 17 lakh crores together in the public capital expenditure, and the rest has to come from the debt funding, and debt funding essentially coming from the private capital investment.
What is very heartening to note that today we are seeing, as we speak, there is an increasing development is that several indicators suggest that a new private investment cycle is already taking place. Manufacturing capacity utilization is approaching 80%. Nearly 70% of announced investments are being driven by private enterprises, and corporate balance sheets are much better positioned to invest, and the deleveraged balance sheet of corporates is a good indicator for investment cycle to kick in.
But this is the whole investment capital investment in the country is predominantly banking sector-led. While we are trying to attract a lot of capital pools in terms of private equity, private credit, and the capital markets, the debt capital markets is predominantly driven by the banking sector. But when we talk about Viksit Bharat capital requirements, it need not necessarily be the infrastructure investment. I think the investment in MSMEs, agriculture are two important components. I saw that you know the lot of agri value chain is being mentioned. So what we are trying to do in the banking sector today is to redefine the way these conventional sectors are financed today. A few days back, honorable finance minister asked us to organize PSB confluence. All the public sector banks came together to look at what are the different financing models for MSMEs and agriculture. And the components which have been discussed in this conclave are also the themes what we have discussed in terms of agriculture from a conventional crop loans. I think we need to move to the agri investment and more importantly agri value chain financing. We are defining with the coordination with NABARD, the whole banking sector is defining the various nodes in this agri value chain, and a lot of states, the Meghalaya example what Anand has mentioned is primarily the financing the agri value chain. How the bank gets into this value chain financing is something is the next cycle of financing the entire value chain in agriculture and MSMEs. We are moving from traditional collateral-based lending to a cash flow-based, data-driven lending with availability of GST data, income tax data. Today, in SBI alone, we have processed more than 1 lakh cr loans for MSMEs which are non-collateralized and cash flow-based lending. I think the future for MSMEs is essentially based on the government CGTMSE support and the cash flow-based assessment.
But one of the critical components in the financing, I think again the theme which was discussed here is financing the energy transition itself. While we keep talking about the renewable energy, there are a lot of value chain elements into this energy transition. But primarily what we are looking at is one of the biggest challenges which we are going to face in the energy transition financing. While we are financing the renewable energy, the evacuation challenges which are extremely important is coming up now. And when we look at financing the renewable energy and the power financing, we seem to be getting into the same situation in 2018-19 where the electricity was produced in abundance but not transmitted to where it is required to be utilized. So I request, I think the states have to play an important role in terms of providing the right of way and land acquisition for transmission lines.
SBI has been on the forefront of financing both on the infrastructure and commercial financing, and more importantly inclusive financing where with the broad network of its branches we are one of the largest providers of financing into MSMEs, agriculture, self-help groups, and most of the rural and semi-urban activities combined with our ability to finance the corporates. But we also have started in the last one year how do we finance emerging sectors. We started one center of excellence called Chakra. This has identified eight emerging sectors starting from data centers to global capability centers, green hydrogen, and many of the areas which are identified. And today our green advances portfolio itself is about 1.38 lakh crores, and we see a greater opportunity of engaging with the states in providing the finance to this.
But when it comes to the states, the theme of the subject is that how the states also can be part of this financing the Viksit Bharat. These are the traditional financing models which are available. Budgetary sources, institutional funding predominantly have been bank funding, but a bit of multilateral funding also has been available. Some of the infrastructure institutions whether NABARD, REC, PFC, more importantly the new institutions like NAFID, National Bank for Financing Infrastructure Development, and NIIF is a sovereign wealth fund which is run very efficiently. This is also some funding institutionally available. Market borrowings predominantly funded through the 76% of state GDP is market borrowing. SCSS is another important support which is being given by central government to support the capital investment by the state governments.
Project delivery models broadly remained the public-private partnerships, HAM, but I saw that some of the states utilizing this structure very efficiently particularly on the HAM side. This is hybrid annuity model for the roads. I think some of the states like Maharashtra and others have done extremely well in terms of HAM adoption.
But future capital for states have to be looked beyond banking, and one of the things which we've been talking about the urban infrastructure requirement, while that is going to be the biggest driver of capital investment, we are still grappling with that how do we arrive at the bankable model for urban infra financing. We have the challenges in terms of user charge collection and many states adopting a zero fee structure of public utilities. While they all create a complex situation to handle, one of the suggestions which we're making is that municipal bonds particularly on the cluster-based municipalities. I think the pooling of municipal corporations and raising the bonds for the pooled municipal entities is one of the options which you have on this. State-backed green bonds, I think green bonds the central government itself tried the green bond moment, there's no greenium available, but there is a set of investors who are looking for investing in the green bonds, and this is also another model which we can look at. And the institutional side, as I mentioned, predominantly is a bank funded.
In institutional finance available, but NAFID has built up a good book of almost a trillion rupees in the infrastructure financing. NIIF as I mentioned is half a trillion rupees, but these institutions are looking at what are the efficient bankable models states will come out with. I'll just come to that what are we looking at, but there is an opportunity for you to asset recycle and monetization. Some states have undertaken this, some states are working towards that particularly through securitization and investment trusts, and retail investment trusts are also gaining popularity. There's a good amount of investor interest to put in InvIT.
There are a lot of cash generating assets in the state governments. Can we bring into the InvIT model is also something what you can look at through the asset monetization, what we call recycling the capital. And the blended financing particularly public, multilateral, and private capital also can be combined, and we are working with many of the multilateral institutions to bring this blended financing model. Pooled municipal financing model I mentioned particularly it provides market access to multiple urban local bodies if we bring them together.
The capital stack itself particularly urban challenge fund which is now launched, how do we utilize the urban challenge fund is something which you can look at. But more importantly, you know when the challenges to sustain the investment cycle, the preliminary and the primary requirement from investors is ease of doing business. Today I can confidently say that while at the central government level investors are comfortable in dealing with many of the departments, many of the entities because the certainty of the policies is there, but most of the investors feel uncomfortable where land approvals are delayed. Even approvals are given and physical land holding is not handed over. Timely acquisition is a big issue. Land still continues to be a major issue in many of the states. Right of way what I mentioned in the transmission project, we are struggling to get the transmission lines completed because the right of way is not provided, and this is the same cycle which we had seen 10 years ago. We should not allow it to recur. Similarly environmental and statutory clearances are held up for a long time, and the land where it is allocated, the banks look for timely completion of mortgage of land. We have seen that the project is complete and it is generating cash, but land is still yet to be mortgaged in many of the states. There's a payment risk dependence on state entities, urban local bodies, and timely release of government obligations also something what makes PPP projects and EPC projects to be a little wary by the investors.
There is a large challenge in terms of inter-departmental execution. Multiple windows for land, forest, environment, utilities. While some of you have developed the single window, still it is not stabilized. And I think the single window clearances for the projects of significance is very important here. And non-uniformity in policy. We are seeing that highly diversified policy prescriptions across the states. While we have the policy prescribed by the central government particularly in terms of the model concession agreements, and they're not adopted uniformly across the states, there is a historical gap between budget allocation and actual capital expenditure that again puts the whole projects under jeopardy.
And as I mentioned, standardized model concession agreement except for roads, I think large number of states have adopted MoRTH model concession agreement, but many areas at the model concession agreements which are given by central government entities or central government departments are not adopted by the state governments. And the biggest challenge what we are facing where the states want to do the projects, the detailed project report quality is very very poor. In fact we have flagged with the honorable finance minister also when we had the PSB conclave there should be a uniform DPR preparation, and this critical component is not being focused on, the whole project gets delayed because the DPR is not understood leading to cost overruns and delays.
Termination and payment security. I think there is the commitment to pay the termination when the project is terminated for various reasons. The concessioner fails to get the termination payment. I think this also puts investors in a doubt. Clearly defined termination payments, escrow mechanisms, and direct agreements will go a long way in terms of attracting the capital, and there is an exit which needed to be given to the developer. Limited long-term finance which is of course we are working with NAFID, and as I mentioned InvIT also can provide a good exit for the investors, but that has to be facilitated. A lot of times the exit itself is very difficult from a project even if the investor is available. State government clearances are not available in time.
I have mentioned asset monetization. I think there is a good turnaround success across transport, water, urban, and other state-owned utilities where we can adopt discom turnaround which had happened in some states. Weak operational and governance structures impede capital recycling. I think this is also something what state governments have to focus in terms of enhancing the governance structure.
These are some of the areas which we have listed out. One is build a rolling bankable pipeline in the overall project execution. Many requirements are not even announced. When you do not announce, how do we know that the state's potential to capital investment?
If you, I think you must have heard popularly some people say that for 2047, 70% of the projects are to be built in India, which means that the overall infrastructure requirement for India would be a greenfield projects, but we don't even know what exactly the state governments are planning in various areas. So please make the announcement, not empty announcement, a clearly defined announcement which will give the visibility for the investors to come and start discussing with you, but they should be bankable. As we mentioned, a consolidated DPR and approval system for a single window will go a long way in terms of attracting the capital.
Standardize the contracts, and I think it's not only enforcement of contracts, contracts themselves are not standardized at this juncture. So model concession agreement for water, bus terminals, urban development, and industrial infrastructure is, I think we all can work together in terms of having the model concession agreements in place, and prepare urban local bodies for markets. It's a difficult political choice for you, but I think if you really want your urban infrastructure to take to the next level which is the need of the hour, we need to seriously think in terms of making them viable investment proposals for them. Urban local bodies cannot attract unless there's a revenue reform and escrow structure. Some of the urban local bodies have done a very nice property tax is growing, and that can be looked at closely.
And recycle mature assets. What I mentioned, you create clearly identify the similar to what central government has done national monetization pipeline. Similarly, I think you can work out on the recurring annual pipeline of state urban local body assets for lease concession or InvIT contribution with proceeds ring-fenced for new capital expenditure. Whatever you raise, don't use it for your regular expenditure but assign them for new capital expenditure. That is, I think is a self-fulfilling and flywheel impact on your investment cycle.
Match capital to risk. SCSS is a wonderful support what central government is giving in terms of capital investment by the states. VGF and UCF models have to be worked out meaningfully and not just to encourage people to come in and not complete the projects, but I think VGF has to be scientifically worked out and make it available. So this all will work as a catalytic capital banks, DFIs for construction, and we mentioned bonds, insurance. I think I saw insurance companies also showing interest in investment, pension funds. These are all stable operators. They're looking for stable operating assets. They may not come for the green financing opportunity, but you can always have a takeout financing by this institute.
So with this, thank you very much. I think capital is available. Let me tell you, I think you may be wondering where is the capital. Capital is available in various forms, but it is in your hands to make that capital work for you and come and interact with you. And some of the suggestions which I made hopefully will get your attention, and we will see an increased investment cycle going forward. Thank you very much for giving this opportunity.
