India Plans ₹20,000 Crore Risk Guarantee Fund to Push Infrastructure Growth

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By - India Daily News | October 2, 2025

India is preparing to launch a ₹20,000 crore risk guarantee fund in a bid to accelerate private investment in large-scale infrastructure projects. The move, under discussion within the central government, could redefine how the country manages policy-related and non-commercial risks that often discourage private players from entering ambitious ventures.

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Why This Fund Matters

The Indian economy has set an ambitious target of becoming a $5 trillion economy by 2025. Achieving this milestone requires unprecedented levels of infrastructure spending — an estimated ₹390 lakh crore (USD 4.51 trillion) by 2030, according to the National Infrastructure Pipeline.

Yet, despite the government’s push, private sector participation has been limited. Developers often shy away due to uncertainty around regulatory approvals, project delays, and financial risks. By creating a dedicated fund that guarantees risk coverage, the government hopes to restore confidence among investors and lenders.

If implemented, the fund would be managed by the National Credit Guarantee Trustee Company Limited (NCGTC). It would serve as a backstop for policy-related risks, allowing banks to extend larger loans for mega projects.

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How It Would Work

• Coverage of non-commercial risks: The fund is expected to absorb losses that arise from policy changes or other external disruptions.

• Bankable guarantees: For credibility, the guarantees must be enforceable with timely payouts.

• Shared responsibility: Developers will likely be required to maintain a minimum stake in projects, ensuring skin in the game.

• Risk-based premiums: Participants may pay variable premiums depending on the project’s risk profile.

This model aims to balance public protection with accountability, while making infrastructure projects more attractive for private investment.

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Expert Views

Economists argue that such a mechanism is long overdue. “Infrastructure inefficiencies are costing India nearly 4–5 percent of its GDP every year,” says a senior industry analyst. “Bridging this gap will not only remove bottlenecks but also open new opportunities in manufacturing, logistics, and exports.”

Policy experts also point out that without significant upgrades, flagship programs like Make in India and Digital India may struggle to deliver their full potential. Competitive manufacturing, in particular, relies heavily on reliable transport, power, and logistics infrastructure.

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A Step Toward Global Competitiveness

India’s infrastructure sector has long been considered its Achilles’ heel. Power shortages, congested ports, and inadequate logistics have slowed industrial output and discouraged foreign investors. A structured risk-sharing fund signals to global markets that India is serious about closing its infrastructure gap.

More importantly, the fund could help align India with global practices. Many developed economies use credit guarantee funds or insurance mechanisms to reduce risk exposure for private players. By replicating this model, India could attract long-term investors such as pension funds and sovereign wealth funds.

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The Road Ahead

While the proposal has generated optimism, experts warn that execution will be key. Guarantee funds in the past have struggled with bureaucratic hurdles and delayed payouts. If the new mechanism fails to deliver timely assurances, it may deter investors instead of attracting them.

Still, the scale of the planned fund — ₹20,000 crore — suggests a strong commitment. If designed properly, it could unlock private capital at a level never seen before in India’s infrastructure sector.

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Conclusion

The government’s plan for a ₹20,000 crore risk guarantee fund marks a significant shift in how India hopes to finance its growth ambitions. By absorbing part of the risk, the state seeks to unleash trillions of rupees in private investment, helping the nation build modern highways, ports, railways, and energy systems.

For India, where weak infrastructure has long been a barrier to growth, this fund could become the cornerstone of a new era of development. Whether it succeeds will depend not just on policy intent but on the ability to implement it with transparency and efficiency.