The history of infrastructure finance has much to teach us. Let’s look at Indian railway securities during the time of the British Empire and the role played by the Economist

The period 1880-1913, characterised as the first era of globalisation, was marked by rising integration in both goods and financial markets. European capital flowed in large quantities across borders and was allocated to productive investments such as the building of infrastructure – canals, railways and ports. Britain was the predominant lender before 1913, and 32% of its investment flows were directed towards railways. In 1865-1913 India was one of the five top recipients of British capital flows, along with the US, Argentina, Canada and Brazil.

The British Empire was a major destination for such capital flows, and India alone took almost 10% of British capital flows during the first era of globalisation. Investors favourably perceived colonial status for two reasons. First, British-governed entities practised sound monetary, fiscal and trade policies. Second, British rule may also have reduced the contract enforcement problems that were endemic in cross-border lending. Furthermore, both these benefits were heavily advertised in the media and encouraged investors to allocate their investments in profitable Indian railway securities.