Gridlines − The opportunity and challenge of India’s infrastructure

Share of private sector in infrastructure development as a proportion of GDP
(At 2006-2007 prices)

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Key findings

India's government has called for $1 trillion in infrastructure spending in the five years through 2017.

The Indian Planning Commission has estimated that the country will need 180 additional airports in the next decade.
"For India’s economy to make sustained progress, we have to build better roads so that the transportation of goods becomes efficient; we have to build ports; we have to enhance our power capacity; and we have to improve access to coal and other raw materials."
N.R. Narayana Murthy, Chairman Emeritus of Infosys, board member for HSBC, the UN Foundation, the Ford Foundation, and the Wharton School
"India has done well to get to the current orbit. But to move to the next orbit, we need good leadership. To bring prosperity to the vast majority of Indians, we need to enhance our governance system, enhance our transparency and accountability, combat corruption, and enhance our infrastructure."
N.R. Narayana Murthy, Chairman Emeritus of Infosys, board member for HSBC, the UN Foundation, the Ford Foundation, and the Wharton School
"Even if we just equal over the next 20 years what has happened over the last 20 years, you are going to see a country which is very definitely at the top edge of the second world. Not the first world, but definitely the second."
M.J. Akbar, Editorial Director of the weekly news magazine India Today
"Corruption doesn’t simply create a transaction that has to be factored into the business plan officially or unofficially. What corruption does is it creates space for the incompetent to buy their way into the most important sectors of India’s economy."
M.J. Akbar, Editorial Director of the weekly news magazine India Today

The need to upgrade India’s infrastructure is especially acute in its huge cities. With the urban population projected to reach 500 million by 2017, experts discuss what is holding India back. Challenges to bridging the infrastructure gap are broad reaching and encompass such critical areas as natural resources shortages, corruption, retreating investors, and pressure created by the demands of a large and growing population. But there are models within India that are working including some privatizations. India’s public and private leaders are working to sustain the remarkable economic growth that it’s racked up in recent years. Priorities highlighted are ideas for improving governance, transparency and accountability, while combating corruption, and enhancing infrastructure.

India is one of the world’s most attractive markets for companies in the infrastructure business

Recognizing the almost limitless infrastructure requirements, the government has called for $1 trillion in infrastructure spending in the five years through 2017. The priorities include three airports, two ports, an elevated rail-corridor in Mumbai, and almost 6,000 miles of new roads. The Ministry of Road Transport outlined plans for $120 billion worth of road-widening projects, with 65% of this money targeted to come from the private sector. There are also plans for $60 billion to be invested in India’s ports by 2020. The Indian Planning Commission has estimated that the country will need 180 additional airports in the next decade. And the government has set ambitious goals for wind, solar and nuclear energy, all of which will be needed to supplement power from coal and gas. Given the scale of this infrastructure gap, it’s small wonder that India is one of the world’s most attractive markets for companies in the infrastructure business. A recent report by Business Monitor International predicted that India’s infrastructure sector will grow by 7.9% in the 2013 fiscal year — down from a previous estimate of 9.4%, but still a formidable rate of growth. The opportunities are so extensive that money has poured in from overseas, including investments in 2011 from leading private equity firms.

But India’s difficult business environment has sapped the enthusiasm of many foreign investors. Among other things, they complain about unpredictable regulations; bureaucratic delays in approving projects; endless struggles to secure land rights; and the government’s stalled attempts at reform. The country’s reputation for corruption is also a major deterrent: in 2011, India ranked 95th out of 182 countries in Transparency International’s Corruption Perceptions Index, down from 87th in 2010.

Not surprisingly, some investors have retreated. According to Reuters, private equity investments in Indian infrastructure sank to $183 million in the first quarter of 2012, down from $459 million in the same period of 2011. There is also a rising tide of domestic disillusionment about the government’s unwillingness to tackle the nation’s economic challenges.

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Share of private sector in infrastructure development as a proportion of GDP
(At 2006-2007 prices)

Emerging markets capital
projects and infrastructure

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