Islamic Financial Instruments an Opportunity for Financing Infrastructure in India

Abstract

Infrastructure growth is sine quo non to the growth and development of an economy. India has been suffering from demand-supply mismatch in terms of funding requirements to finance infrastructure projects. Funding deficit of INR 14,60,784 crores has been estimated for twelfth five year plan (2012-2017). Introduction of Islamic finance can play a crucial role in order to bridge the gap and support India in achieving anticipated growth projections. The aim of the paper is to explore the possibility of funding infrastructure in India through Islamic financial instruments. The methodology consists of estimating infrastructure funding requirements in India, understanding development and status of Islamic finance in global context, exploring basics of Islamic banking system along with its various financial instruments especially Sukuks as well as identifying challenges and the way forward.