Strong infra key to rapid growth

It is well-known that India has consistently been slipping down the global infrastructure rankings which warrant immediate attention. The Global Competitiveness Report 2014-15 of the World Economic Forum showed that the country slipped two places to 87th rank in overall infrastructure. The present government is, no doubt, concerned and the present Budget has demonstrated its intention of providing maximum possible resources to gear up infrastructure development.

That the government is bent on giving a boost to infrastructure is highlighted in the recent Budget by setting up a National Investment and Infrastructure Fund, which would channel an annual flow of Rs 20,000 crore into the sector to fund road, port and airport projects. According to Finance Minister Arun Jaitley, this will “enable the trust to raise debt and, in turn, invest in equity in infrastructure finance companies such as IRFC and NBHB.”

Apparently, investment in infrastructure is expected to go up by Rs 70,000 crores in 2015-16 over 2014-15 from Central funds and resources from Central public sector enterprises. A study by industry body PHDCCI and Crisil released recently found that India would need at least Rs 26 lakh crore investments in infrastructure over the next five years.

Of the projected investment of $1 trillion or Rs 60 lakh crore during the 12th Plan period, power and roadways alone account for one-third or around $330 billion. The previous UPA government initiated most of the projects though recently special emphasis and funds have been given to Ganga clean-up and river interlinking while creation of Smart Cities is also on the agenda.

In addition, there is a $250 billion offensive with renewables accounting for $1,000 billion to create 1 lakh MW of solar power and 60,000 MW of wind capacities. This apart, there are plans to give emphasis to the roads sector and around 189 highways projects, involving a cost of Rs 1,80,000 crore, which are stuck due to various problems, would be taken up shortly.

Both road and rail connectivity is vital for the economy and, apart from highways, State governments have to be helped in construction of rural roads. In the coming year (2015-16), around 1l lakh km of new roads are said to be planned apart from completing 1 lakh km of highways already under construction. At a time when there is lot of talk of tackling rural poverty effectively, it goes without saying that as rural connectivity is vital, only then can the livelihood situation and overall development of the sector improve.

The other crucial sector is power and rural electrification is a crying need of the hour as, according to a UN report, 76 million households have been living without electricity! As per available records, the government plans to add 88,000 MW capacity during the Plan period.However, previous performance has not been quite encouraging as the country added only 50,000 MW during 2007-2012 against the target of 78,000 MW.

The obvious reasons for this are manifold but principally centre on problems relating to land acquisition, delay in environmental clearance and the unwillingness for proper rehabilitation of evictees. In view of the resource constraints, the Government has been exploring various methods to develop infrastructure. In fact, the G-20 at the meeting in Brisbane agreed to set up a Global Infrastructure Hub with a five-year mandate.

There are several large investors such as pension funds in Australia, Japan and Canada, which are on the lookout for investment options. Australia is reported to have around $2 trillion in pension funds and would be keen to invest in robust infrastructure projects in the country. If funding comes from abroad, there would be a need to set up an investment arm that can undertake the work of investing in various projects.

By:Dhurjati Mukherjee