The Economic Survey 2007-08 has called for a comprehensive and simpler policy framework to raise funds to finance India’s infrastructure requirements.
India’s infrastructure requires investments to the tune of Rs 200, 000 crore over the next five years to sustain the targeted 9 % annual economic growth. Infrastructure spending needs to be upped to 9 % of gross domestic product in the five years ending March 31, 2012, from about 5% now, the Economic Survey points out. Of the Rs 200, 000 crore needed, 37.16 % will be from the central government, 32.76 % from state governments and 30.07% from the private sector, the report said.
Infrastructure growth during April-December decelerated to 6.6% from 7.5% a year ago, gagged mainly by lack of investor friendly policies and lack of funds. The country has so far implemented or approved private public partnership projects (PPP) in 221 projects valued at Rs 129,575 crore.
Of the total resources required for the sector during the 11th Plan period, a substantial part would have to come through domestic bank credit, non-bank finance, pension and insurance funds besides the external commercial borrowings route, the survey said.
The Committee on Infrastructure (CoI) headed by the Prime Minister had identified many problems in the sector including inadequate shelf of bankable projects, insufficient long-term finance and policy as well as regulatory gaps.
To overcome these, besides allowing viability gap funding in infrastructure, the government has allowed multilateral funding agencies like the Asian Development Bank to raise rupee bonds and carry out currency swaps to provide long-term debt to PPP projects.
Currently, in most of the infrastructure projects including road building and construction of airports government permits foreign equity. The Railway budget announced on Tuesday also opened up avenues for private funding in the rail infrastructure as well by allowing PPP in track laying, containers as well as rail station modernisation.
“Private investment in India's infrastructure has increased in the past five years, with commitments in 2006 about double that of Brazil and China, making India a “leader among the middle- and low-income countries,” according to the survey. The Survey urges the government come out with immediate policy measures to facilitate easier fund flows into the country.