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Sector Analysis: Infrastructure in India

The document discusses India's infrastructure sector and needs. It notes that India requires substantial investment in infrastructure to support its rapid economic growth, with estimated investment needs of $492 billion over the next five years. The government has aimed to boost infrastructure investment through measures in the Budget 2011, including raising limits for foreign institutional investment in infrastructure bonds. However, India still faces challenges in mobilizing the huge funds needed to develop its transport, energy, and other infrastructure industries required to sustain long-term growth.

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Sanjay Lohani
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54 views

Sector Analysis: Infrastructure in India

The document discusses India's infrastructure sector and needs. It notes that India requires substantial investment in infrastructure to support its rapid economic growth, with estimated investment needs of $492 billion over the next five years. The government has aimed to boost infrastructure investment through measures in the Budget 2011, including raising limits for foreign institutional investment in infrastructure bonds. However, India still faces challenges in mobilizing the huge funds needed to develop its transport, energy, and other infrastructure industries required to sustain long-term growth.

Uploaded by

Sanjay Lohani
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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SECTOR ANALYSIS:

INFRASTRUCTURE IN INDIA

PRESENTED BY
Rohit Pandey
Rohit Anand Pathak
Rohit Goel
Vinika Tyagi
Richa Motwani
Pushpendra Singh
INDIA GROWTH STORY
• India has emerged as one of the fastest growing
economies.
• GDP expected to be 8.75-9.25%
• The robust current growth in GDP has exposed
the grave inadequacies in the country’s
infrastructure sectors
• Total infrastructure investments in the eleventh
plan period 2007-08 to 2011-12 as US$475
billions
Infrastructure Requirements
• World Economic Forum has noted that India’s
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


Budget 2011:the impact on infrastructure

• Budget 2011 doled out quite a few measures both


tax and non-tax in order to boost investment in
infrastructure sector.
• Key non-tax proposals include:
• issuance of tax-free bonds to the tune of Rs 300 billion
• extension of tax exemption by a year on tax-saving infrastructure
bonds
proposal to introduce special infrastructure debt funds to attract
foreign financing.
Budget Highlights……

Interest of international investors


• Strong interest evinced by international investors
in India’s infrastructure
• In the budget, the FM raised the limit for foreign
institutional investors in corporate bonds for
infrastructure, in a bid to overhaul the sector
•  The limit was increased to $25 billion from $5
billion,
• Total limit available to FIIs to invest in corporate
bonds in $40 billion.
Budget Highlights

• Finance Minister Pranab Mukherjee,proposed an


allocation of Rs.2,14,000 crore for infrastructure sector
• 23.3% higher than the previous year.
• Rs.30,000 crore to be issued by various government
undertakings in the year 2011-12.
• As expected higher fund allocation across
infrastructure development scheme Bharat Nirman has
been proposed. 
• Allocation to the tune of Rs 58,000 crore has been
planned for the scheme
Budget Highlights…..
• India Infrastructure Finance Company Limited
(IIFCL) is expected to achieve a cumulative
disbursement of Rs.25,000 crore by March 31,
2012
• Seven projects have been sanctioned with a debt
of Rs.1500 crore. Another Rs.5000 crore will be
sanctioned during 2011-12
• The finance minister also proposed to raise the
corpus of rural infrastructrure development fund
from Rs 16,000 crore to Rs 18,000 crore.
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
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 2011.
• The government assigned US$2 billion in funding
for airport development.
• Maintenance, Repair and Overhaul (MRO) growing
in a big way
• During April-December Indian and International
traffic grew by 16.8 % 10.2%.
• Indian infrastructure companies finished stronger,
with GMR Infrastructure gaining 3.1% and GVK
infrastructure up 2.1%
Budget 2011:Impact

Roads…..
• 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 15-18% over
the next 5 years
Budget 2011:Impact
Roads – Investments…..
• 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  
• Reliance Infrastructure is close to achieving
financial closure for its entire road projects
portfolio after tying up debt aggregating to Rs
2,468 crore for two of the projects it bagged in
2010.
Budget 2011:Impact
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 2011-12
• 95% of India’s 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
Conclusion
• Investment requirements of infrastructure sector
huge
• India growth story to continue
▫ 50% of the population is below 25 years
▫ Huge domestic demand
• 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
THANK YOU !!

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