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India : Perspective On Infrastructure Investments
Vinayak Chatterjee
TokyoMay, 2007
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“Many of my ministerial colleagues must have spoken to you about the challenges posed by the so called 'infrastructure deficit'. This area, apart from agriculture, is the one, which has been gaining our attention most. We have set up a Special Purpose Vehicle for raising dedicated long-term funds for financing infrastructure. We have moved away from a government-centered approach to a public-private partnership approach…
Indian Prime Minister, Dr. Manmohan Singh on Infrastructure
[From the speech at the India Economic Summit, 2005]
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…We have developed transparent, competitive procedures for such partnerships, which would function on commercial lines. We have established a viability gap funding mechanism for making these projects commercially viable. I am certain that we are now at the take-off point in infrastructure.”
Indian Prime Minister, Dr. Manmohan Singh on Infrastructure (Contd..)
[From the speech at the India Economic Summit, 2005]
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Approach Paper to the 11th Five Year Plan provides a ‘vision’ for the period 2007-08 to 2011-12.On 18th October’06, Chairing a meeting of the Planning Commission, the Prime Minister set a target of 9% average economic growth for the 11th Plan.
Vision For Next 5 Years (2007-2012)
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The Planning Commission suggests that “investments will need to increase from 4.6% of GDP to between 7% and 8% in the 11th Plan period”.
This would entail an outlay of US$ 350 Billion across the 11th Plan Period (2007-2012).
Gross Capital Formation in Infrastructure (GCFI)
Investments Required in Infra in Next 5 Years : A Scenario
GCFI Required
GCFI** Required as % of GDP
GDP* Growing @ 9% p.a.
5%
718
2005-06
Last Year NEXT 5 YEARS(11TH PLAN)
3509677706047
8%7%7%6.5%5.5%
Total : 5 Years
120411051014930853
2011-12
2010-11
2009-10
2008-09
2007-08
* GDP 2005-06 (Market Prices) was Rs.3231,000 Crores = US$ 718 Billion** GCFI = Gross Capital Formation in Infrastructure
(US$ Billion)
5.5%
783
2006-07
This Year
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Japanese Yen 40,000 Billion is thus the size of the investment opportunity for next 5 years in Indian infrastructure.
Size of the Opportunity
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World Bank sources tell us that in the 1990s:
70% of infrastructure investment in developing countries came from governments or public utilities22% came from the private sector8% from official development assistance
General Pattern of Funding
70%245From Public Expenditure
10%35From World Bank, ADB, JBIC and other multilateral/bilateral agencies
20%70From Private Capital (Domestic and FDI)
100%350Resources to be organized for infra investments in 11th Plan Period
%Amount
Perspective on Indian Infra Funding Sources
(US$ Billion)
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Sectoral Requirement of Funds
34120Energy
35076
274119
184967
Amount %Sector
78Envisaged22Others*
100Total
3Ports3Airports5Irrigation
14Nat Highways19Railways
* Telecom, Tourism, SEZs & Townships, Supporting Urban Infrastructure, Water & Sanitation, State & Rural Roads, Logistics etc.
(US$ Billion)PPP Possibilities
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Key Imperative ONE : Private Sector
• PPP initiatives leading to a large pool of bankable projects.
• Establishment of really “independent” Economic Regulators.
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Key Imperatives TWO : Overseas Development Assistance (ODA)
Engage aggressively with multilateral agencies like• World Bank• Asian Development Bank and• Japan Bank for International Cooperationto secure commitments totaling not less than US$ 39 Billion for the 11th Plan period.
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Key Imperatives THREE : Public Expenditure
•Structure large-scale projects (like Rail Freight Corridor, NHDP and Bharat Nirman) involving substantive public expenditure
•Implement fresh ‘out-of-the-box’ initiatives to raise savings and resources for this purpose to a level of US$ 234 Billion.
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Key Imperatives Four : Long Term Financing
Create vibrant equity and long-term debt markets for infrastructure financing.
Consider innovative means to use forex reserves.
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Project pipe-line creationInter-sectoral co-ordinationProject implementation monitoringGCFI as key performance indicatorCreation of ‘independent economic regulators’PPP policies and dedicated PPP cellsLong-term debt marketsPolitical will and public mind-set to implement user-pay charges
Moving Forward
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“There is enough private capital jostling around the world. We will have to change our thinking to tap these resources. …………We will have to think out of the box. We will have to accept that we are part of the global economy. ……….”
Mr. P. Chidabaram, Finance Minister
[Speaking at the Infrastructure Seminar, Vigyan Bhawan, New Delhi , 7th October’06]
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The Indian Infrastructure Sector welcomes participation across all areas by Japanese companies: Advisory Engineering Project Management Project Development Construction Financing Operations & Maintenance
Welcome !