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  • Neeraj.AryaText BoxTHE INDIAN INFRASTRUCTURE SECTOR: INVESTMENTS, GROWTH AND PROSPECTS

    Neeraj.AryaText BoxJanuary 2013

  • ........................................................................................................................

    Neeraj.AryaText Box FOREWORD

    Neeraj.AryaText Box.................................................................................................................................. 3

    Neeraj.AryaText Box2. WAY FORWARD - 2012-13 UNION BUDGET, AND APPROACH TO 12TH FIVE

    Neeraj.AryaText Box.................................................................................................................................. 9

    Neeraj.AryaText BoxCONTENTS

    Neeraj.AryaText Box1. INDIA'S PAST AND CURRENT FOCUS ON INFRASTRUCTURE DEVELOPMENT

    Neeraj.AryaText Box .............. 4

    Neeraj.AryaText Box1.1 Electricity

    Neeraj.AryaText Box............................................................................................................................... 5

    Neeraj.AryaText Box.................................................................................................................................14

    Neeraj.AryaText Box2.1 How 2012-13 Union Budget benefits Indian infrastructure sector

    Neeraj.AryaText Box................................... 9

    Neeraj.AryaText Box2.2 Approach to 12th Five Year Plan and other government initiatives

    Neeraj.AryaText BoxYEAR PLAN

    Neeraj.AryaText Box...................................10

    Neeraj.AryaText Box3. CONCLUSION

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    Neeraj.AryaText Box1.2 Roads

    Neeraj.AryaText Box...................................................................................................................................... 6

    Neeraj.AryaText Box1.3 Telecommunications

    Neeraj.AryaText Box............................................................................................................. 6

    Neeraj.AryaText Box1.4 Railways

    Neeraj.AryaText Box................................................................................................................................. 6

    Neeraj.AryaText Box1.5 Airports and Ports

    Neeraj.AryaText Box................................................................................................................. 7

    Neeraj.AryaText Box................................................................................................. 7

    Neeraj.AryaText Box1.6 Water Supply and Irrigation

    Neeraj.AryaText Box................................................................................................................ 8

    Neeraj.AryaText Box1.7 Summary Analysis

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  • FOREWORD

    The development of a countrys infrastructure is vital to the growth of its sectors and the overall economy. Indias infrastructure facilities, including transport, sanitation and electricity, are still estimated to be inadequate for its population, thereby presenting a challenge for sustainable economic growth in sectors such as heavy manufacturing. This research paper therefore analyses the Governments focus on infrastructure, and key factors that are expected to ensure a strong growth in years to come.

    The infrastructure sector primarily comprises of electricity, roads, telecommunications, railways, irrigation, water supply and sanitation, ports and airports, storing facilities, and oil and gas pipelines.1

    Recognising the adverse implications of poor development in some of these sub-segments, the Indian government has significantly increased its infrastructure spending over the last 10 years. It is also proactively encouraging private sector investment, to speed up development. This move has enabled many private sector companies to intensify their focus on the development of urban infrastructure.2,3 In addition, the Indian government has taken up many large scale infrastructure ventures such as the DelhiMumbai Industrial Corridor, for which the government has collaborated with Japan for financial and technical support.4

    This research report aims to analyse the link between public and private investments in the infrastructure sector, and infrastructure projects, vis a vis the performance of the Indian economy. It provides a perspective about the Indian governments focus on infrastructure development over the last decade, along with policies and initiatives introduced to boost development. The report also provides an analysis of the actual and projected data from the 10th and 11th Five Year plans, and identifies areas that have faced deficits or made investment gains, and the associated reasons.

    1 Planning Commission 2 Economic Times Analyst Views on Infrastructure Sector 3 Economic Times Union Budget has Potential for Infrastructure 4 Delhi Mumbai Industrial Corridor

    http://planningcommission.nic.in/plans/mta/11th_mta/chapterwise/chap14_invest.pdfhttp://articles.economictimes.indiatimes.com/2012-03-16/news/31201360_1_infrastructure-sector-infrastructure-investment-tax-free-bondshttp://articles.economictimes.indiatimes.com/2012-03-16/news/31201565_1_infrastructure-investment-union-budget-basic-infrastructurehttp://delhimumbaiindustrialcorridor.com/

  • The Indian Infrastructure Sector: Investments, Growth, and Prospects 4

    .........

    1. INDIAS PAST AND CURRENT FOCUS ON INFRASTRUCTURE DEVELOPMENT

    Given the fact that strong infrastructure facilities form the backbone of a nations economy, the Indian government began to shift its focus to infrastructure development, as was evident from the 10th and 11th Five Year plans. During this period, the Planning Commission identified inadequate infrastructure as a significant barrier to economic growth. It persuaded the government to undertake initiatives such as public private partnerships (PPPs), to draw private sector investments into the infrastructure sector. This move has benefited several infrastructure companies, and has consequently renewed their interest in undertaking large scale infrastructure projects within the country.5 Infrastructure investments are expected to double from Rs 9,19,225 crore (US$ 169.9 billion) during the 10th Five Year Plan (200207) to Rs 20,54,205 crore (US$ 379.6 billion) during the 11th Five Year Plan (200712).6 Figure 1 represents a simple comparative analysis of both the proposed and actual (or projected) infrastructure investments in the 10th and 11th Five Year plans. The mid term appraisal of the 11th Five Year Plan revealed that some sub sectors, such as telecommunications, will exceed their investment targets by approximately 33 per cent, while other sectors, such as roadways, railways and ports, will see a notable deficit in expected investments.

    Figure 1 Investments in infrastructure by sector, 10th and 11th plans (in US$ billion

    at 200607 prices)

    Source: Planning Commission 5 The Economic Times Analysts' views on the infrastructure sector 6 Planning Commission

    Original Projections Actual Investments Original Projections Revised Projections

    11th Plan 10th Plan

    Electricity

    Roadways

    Telecom.

    Railways

    Irrigation

    Water Supply

    Ports

    Airports

    Storage

    Oil & Gas

    33.5%

    16.6%

    11.9%

    13.7%

    12.8%

    7.4%

    1.6%

    0.8%

    0.6%

    1.1%

    37%

    13.8%

    11%

    11.1%

    13%

    6.5%

    2.5%

    0.8%

    0.6%

    3.5%

    30.4%

    15.3%

    12.6%

    12.7%

    12.3%

    7%

    4.3%

    1.5%

    1%

    0.8%

    32%

    13.6%

    16.8%

    9.8%

    12%

    5.4%

    2%

    1.8%

    0.4%

    6.2%

    Figures in US$ billion

    Rs 8,71,445 crore US$ 164.3 billion

    Rs 9,19,225 crore US$ 173.3 billion

    Rs 20,56,150 crore US$ 387.7 billion

    Rs 20,54,205 crore US$ 387.3 billion

    http://planningcommission.nic.in/plans/mta/11th_mta/chapterwise/chap14_invest.pdfhttp://articles.economictimes.indiatimes.com/2012-03-16/news/31201360_1_infrastructure-sector-infrastructure-investment-tax-free-bondshttp://planningcommission.nic.in/plans/mta/11th_mta/chapterwise/chap14_invest.pdf

  • The Indian Infrastructure Sector: Investments, Growth, and Prospects 5

    .........

    Though high investments were proposed in the 11th Five Year Plan, efficient project execution is the key for infrastructure projects. The average rate of awarding planned projects was about 70 per cent until 2009, with 60 per cent of the projects facing cost over runs7. Taking into account the rapid urbanisation expected in the next two decades, it becomes imperative to analyse bottlenecks to growth in the infrastructure sector, and forming strategies and policies to mitigate them. The next sections include an analysis of each sub sector in the infrastructure sector. The sections also cover the developments and projects initiated or completed during the 11th Five Year Plan. A summary of projects that were either implemented or completed in the central sector as on 31st March 2011 is given below.

    Table 1 PPP projects completed or implemented in the central sector

    (cost in Rs crore)

    Sector Completed Implemented

    Number Cost Number Cost National

    Highways 55 20,139 127 103,455

    Major Ports

    29 9,677 20 34,138

    Airports 3 5,883 2 23,310

    Railways 5 1,166 4 2,363

    Total 92 36,865 crore

    (US$ 6.9 billion)

    153 1,63,266 crore


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