Finance Minister Jaswant Singh has said that his ministry would discuss the option of tapping India's foreign exchange reserves of over $104 billion for investment in government-guaranteed infrastructure bonds that could be floated by financial institutions.

Responding to a suggestion by the Confederation of Indian Industry in an interactive session, the first by Singh after the presentation of the Interim Budget 2004, he said, "The finance secretary and the banking secretary can discuss it with the RBI governor. This is an innovative way to raise funds."

The minister had on January 9 announced that Rs 50,000 crore (Rs 500 billion) would be catalysed over the next three years for infrastructure projects like power generation, ports, airports, roads, tourism, telecommunications and urban infrastructure.

The funds are to be lent at 200 basis points below the prime lending rate.

Omkar Goswami, chief economist, CII, said such huge funds could be raised by tapping the dollar surplus with the Reserve Bank of India.

The finance minister said the fiscal incentives for the power sector till 2012 could be extended to other industries also. "It is an indication of what can follow for other sectors," Singh said.

He, however, ruled out an extension of Section 80HHC of the Income Tax Act, which exempts export profits from tax.

"How long should Indian exports rely on state support? We have acted on the advice of the commerce ministry," he said.

In a speech marked by all-round optimism the only concern Singh exhibited was the lack of investment by the manufacturing sector.

He waxed eloquent over the feel-good factor and the new-found optimism among all segments of rural and urban India.

Reacting to a query, Singh said the demand to accord the health sector infrastructure status was valid.

"India can be a health destination for the world," he said. Health insurance was another area where the minister held out hope for the industry.

He said his ministry would address the concerns of capital entry barriers for health insurance companies.

However, reducing the Rs 100 crore (Rs 1 billion) capital requirement for health insurance companies required amendments to certain laws.

The minister said the banking secretary would discuss the issue with the Insurance Regulatory and Development Authority.

Singh also said he would expedite grant of loans for housing in rural areas. In his announcement a few weeks ago, Singh had said flexible repayment options would be made available to farmers on housing loans. This could be linked to the cyclical income in agriculture.