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India'S Infrastructure - Issues and Prospects

India has experienced high economic growth in recent years, but its infrastructure requires substantial investment to support continued growth. The government aims to more than double infrastructure spending in its 11th Five Year Plan. An estimated $492 billion is needed for infrastructure investments over the next five years, with $147 billion expected from private sources. International investors have shown strong interest in Indian infrastructure projects. Key challenges include absorbing large investments while managing the appreciation of the rupee. Transportation such as airports, roads, railways and ports represent major opportunities for public-private partnerships and foreign investment to develop India's infrastructure.

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52 views

India'S Infrastructure - Issues and Prospects

India has experienced high economic growth in recent years, but its infrastructure requires substantial investment to support continued growth. The government aims to more than double infrastructure spending in its 11th Five Year Plan. An estimated $492 billion is needed for infrastructure investments over the next five years, with $147 billion expected from private sources. International investors have shown strong interest in Indian infrastructure projects. Key challenges include absorbing large investments while managing the appreciation of the rupee. Transportation such as airports, roads, railways and ports represent major opportunities for public-private partnerships and foreign investment to develop India's infrastructure.

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Gauvs Sabbs
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© © All Rights Reserved
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Download as PPT, PDF, TXT or read online on Scribd
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INDIAS INFRASTRUCTURE Issues and Prospects

INDIA GROWTH STORY

Indias economic growth is attracting wide attention India & China are enjoying high economic growth In 2006-07 Indias growth was 9.4% Economic prosperity is placing huge demands on infrastructure India is the third largest economy behind USA and China

Infrastructure Requirements

World Economic Forum has noted that Indias annual investments in infrastructure between 1998 and 2005 averaged 4% of GDP compared to 8.2% for China Government of India is addressing the infrastructure requirements 11th Five Year Plan (2007-2012) calls for more than doubling the financial outlay for infrastructure

Investment requirements

Total financing requirements

$492 billion in the next five years

Of this, $147 billion to come from private investment

Share of private investment in total to rise from 17% to 30% by 2012.


Investment to touch $1.48 trillion by 2017

Interest of international investors

Strong interest evinced by international investors in Indias infrastructure

This includes Private Equity

3i, Blackstone etc


Citigroup, Macquarie Bank (Australia), Mizuho (Japan), Deutche Bank

International banks

Multilateral institutions including ADB, World Bank, IFC

Challenges before India


India growth story likely to continue Strong economic growth will fuel further demand on infrastructure India should absorb the large investments in infrastructure sector to sustain growth momentum Indian rupee has appreciated against the dollar by 5% over the past year and 20% in the past five years

Development of PPP market in India

PPPs in India are at a nascent stage Slew of measures by government


PPPs in India are accelerating

100% foreign investment allowed in infra sectors Model Concession Agreements evolved Viability Gap Funding (VGF) Regulatory institutions (Telecom Regulatory Authority, Port Tariff Authority) 118 projects valued at $13.4 billion are progressing in roads, ports, airport sectors

Transport Sector the potential in India


Aviation infrastructure 100% foreign direct investment allowed $ 9 billion programme to upgrade 25 airports Delhi and Mumbai International airports two PPP projects with estimated investment of $3.8 billion 19 greenfield airport locations identified Airport Economic Regulatory Authority being set up

Air transportation - growth

Passenger traffic is projected to cross 100 million passengers p.a. by 2010 Cargo traffic to grow at over 20% p.a. over the next five years - To cross 3.3 million tonnes by 2010 Maintenance, Repair and Overhaul (MRO) growing in a big way

MRO market expected to grow by 10%

Roads and Highways

India has the second longest road network in the world of 3.3 million KMs Expressways and highways constitute only 2% of the above US $54 billion earmarked for the sector Cargo traffic expected to grow by 1518% over the next 5 years

Roads - Potential

100% foreign direct investment allowed Incentives: - 100% income tax exemption for a period of 10 years - Grants/viability gap funding for marginal projects available - Model Concession Agreement formulated Opportunities in construction equipment (earth moving, material handling equipment etc), tolling equipment services and advisory (architecture, structural design, soil investigation etc)

Railways

India has one of the largest railway networks in the world (63,000 route KMs network) Accounts for 30% of total freight traffic Traffic volumes set to double by 2012 Potential for rolling stock, locomotives, passenger coaches, track equipment, signalling equipment

Ports

India has coastline of 7500 KMs 12 major ports; 187 minor ports Traffic has grown by a compounded average of 8.5%

Traffic expected to reach 880 million tonnes by 201112

95% of Indias exports & imports moved by sea India expects to double its exports to $150 billion in the next five years

Ports

100% FDI under the automatic route is permitted for port development projects 100% income tax exemption is available for a period of 10 years Tariff Authority for Major Ports (TAMP) regulates the ceiling for tariffs charged by Major ports

Investment needed in the next 5 years $18 billion

Ports - Opportunity

Opportunities exist in

Development of greenfield ports Development of container and bulk terminals Logistics infrastructure Dredging services Port related equipment Ship building, ship repair, maritime training

Role of IIFCL

IIFCL is a SPV to provide long term finance to infrastructure projects


Overriding priority to PPP projects Finance projects in sectors like roads, airports, ports, power, urban infrastructure etc

Since inception in April 2006

Financed 77 projects to the tune of $4.3 billion with a total project cost of $31 billion

Conclusion

Investment requirements of infrastructure sector huge India growth story to continue


Need to bridge infrastructure gaps to sustain economic growth Opportunities for international investors significant India can leverage on its vast human capital to successfully adopt the PPP model

50% of the population is below 25 years Huge domestic demand

THANK YOU

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