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Favourable government policies on globalisation and liberalisation have put India on the fast track. In fact, today India is the second fastest-growing economy in the world, and is the centre of attraction globally. With greater quantum of domestic and international capital flowing into various sectors of the economy, growth is likely to continue. However, it has become imperative for India to modernise and expand its infrastructure not only to sustain, but bank, on the existing growth spree.

Moreover, the government’s initiatives such as the UMPPs, electricity for all campaign, Golden Quadrilateral project, have been a shot in the arm for the sector. Moreover, increased investment outlay in the Eleventh Plan, and higher private investments, apart from the publicprivate partnership, will prove beneficial in meeting infrastructure needs of various segments of the economy.

Projections of investment requirements during Eleventh Plan period

The Indian government proposes to achieve 9% average GDP growth during the Eleventh Plan period. In such a scenario, inadequate infrastructure will be a major hurdle. In order to overcome this constraint, the government is mulling over a programme for infrastructure investment that involves both public and private sectors. According to the Planning Commission estimation, infrastructure investment was just 5.98% of GDP during FY08, but this is expected to go up to over 9.3% by FY12. Undoubtedly, this will require huge investments, especially from the private sector, which contributed merely 19.7% of the total estimated investments in infrastructure (Rs 8,714.5 billion) in the Tenth 5-year plan period. The government anticipates more private investments in infrastructure during the Eleventh 5-year plan period and expects investments to grow from around 1.2% of GDP in FY07 to 2.89% by FY12.

Private investment in infrastructure during the Eleventh Plan

During the Eleventh 5-year plan period, total investment in infrastructure is expected to reach Rs 20,561.5 billion (US$ 514.04 billion). The private sector will contribute around 30.1% of the total projected investment, which amounts to Rs 6,195.9 billion (US$ 154.9 billion), while the remaining will be contributed by the public sector (central and state). The government’s policies have been continuously aimed at accentuating private sector investments in India’s inadequate infrastructure facilities. As a result, private investment is expected to constitute more than 68.7% of the total investment in telecom, ports (61.9%) and airport (69.9%) sectors during the Eleventh Plan. However, private sector investments in the power sector are expected to be just 27.8% of the total investment, while investments in roads and bridges are expected to be around 34.0%. The Centre will contribute 53.3% (Rs 7,656.2 billion) of the total public sector investment in infrastructure of Rs 14,365.6 billion (US$ 359.1 billion) and the remaining 46.7% (Rs 6709.4 billion) will be shared by the state governments.

According to the Planning Commission, infrastructure investments as a percentage of GDP will rise steadily from 6.53% in FY09 to 9.34% by the end of FY12. Electricity will attract maximum investments — 32.42 % of the total investment, followed by roads (15.28%). Sectors such as ports, telecom, water supply and sanitation, airports have seen more investments against the previous plan period. For instance, projected investments in ports are likely to go up from 1.61% in the Tenth Plan period to 4.28% in the Eleventh Plan period. During the Tenth 5-year plan, Rs 8,714.5 billion (US$ 217.9 billion) is estimated to have been invested in infrastructure development, while during the Eleventh 5-year plan period, projected investments on infrastructure is likely to increase by 135.9%.

Source: Planning Commission

The government’s thrust on infrastructure development will continue during the Twelfth 5-year plan to sustain 9% GDP growth. Also, it is expected that the Gross Capital Formation (GCF) in infrastructure as a percentage of GDP will increase from 9.0% to 10.25% in FY17, at around Rs 40,552.35 billion (US$ 989 billion).