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India : Perspective On Infrastructure Investments. Vinayak Chatterjee. by. Tokyo May, 2007. Indian Prime Minister, Dr. Manmohan Singh on Infrastructure.

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india perspective on infrastructure investments

India : Perspective On Infrastructure Investments

Vinayak Chatterjee

by

Tokyo

May, 2007

slide2

Indian Prime Minister, Dr. Manmohan Singh on Infrastructure

“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…

[From the speech at the India Economic Summit, 2005]

Slide 2

slide3

Indian Prime Minister, Dr. Manmohan Singh on Infrastructure (Contd..)

…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.”

[From the speech at the India Economic Summit, 2005]

Slide 3

slide4

Vision For Next 5 Years (2007-2012)

  • 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.

Slide 4

slide5

Gross Capital Formation in Infrastructure (GCFI)

  • 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).

Slide 5

investments required in infra in next 5 years a scenario
Investments Required in Infra in Next 5 Years : A Scenario

(US$ Billion)

Last Year

This Year

NEXT 5 YEARS(11TH PLAN)

2006-07

2005-06

2007-08

2008-09

2009-10

2010-11

2011-12

Total : 5 Years

GDP* Growing

@ 9% p.a.

718

853

930

1014

1105

1204

783

GCFI** Required as % of GDP

5%

5.5%

6.5%

7%

7%

8%

5.5%

GCFI Required

47

60

70

77

96

350

* GDP 2005-06 (Market Prices) was Rs.3231,000 Crores = US$ 718 Billion

** GCFI = Gross Capital Formation in Infrastructure

Slide 6

slide7

Size of the Opportunity

Japanese Yen 40,000 Billion is thus the size of the investment opportunity for next 5 years in Indian infrastructure.

Slide 7

slide8

General Pattern of Funding

  • World Bank sources tell us that in the 1990s:
    • 70% of infrastructure investment in developing countries came from governments or public utilities
    • 22% came from the private sector
    • 8% from official developmentassistance

Slide 8

slide9

Perspective on Indian Infra Funding Sources

(US$ Billion)

Amount

%

Resources to be organized for infra investments in 11th Plan Period

350

100%

From Private Capital (Domestic and FDI)

70

20%

From World Bank, ADB, JBIC and other multilateral/bilateral agencies

35

10%

From Public Expenditure

245

70%

Slide 9

slide10

Sectoral Requirement of Funds

(US$ Billion)

Sector

Amount

%

PPP Possibilities

Energy

120

34

Railways

67

19

Nat Highways

49

14

Irrigation

18

5

Airports

9

3

Ports

11

3

Envisaged

274

78

Others*

76

22

Total

350

100

* Telecom, Tourism, SEZs & Townships, Supporting Urban Infrastructure, Water & Sanitation, State & Rural Roads, Logistics etc.

Slide 10

slide11

Key Imperative ONE : Private Sector

  • PPP initiatives leading to a large pool of bankable projects.
  • Establishment of really “independent” Economic Regulators.

Slide 11

slide12

Key Imperatives TWO : Overseas Development Assistance (ODA)

Engage aggressively with multilateral agencies like

  • World Bank
  • Asian Development Bank and
  • Japan Bank for International Cooperation

to secure commitments totaling not less than US$ 39 Billion for the 11th Plan period.

Slide 12

slide13

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.

Slide 13

slide14

Key Imperatives Four : Long Term Financing

Create vibrant equity and long-term debt markets for infrastructure financing.

Consider innovative means to use forex reserves.

Slide 14

slide15

Moving Forward

  • Project pipe-line creation
  • Inter-sectoral co-ordination
  • Project implementation monitoring
  • GCFI as key performance indicator
  • Creation of ‘independent economic regulators’
  • PPP policies and dedicated PPP cells
  • Long-term debt markets
  • Political will and public mind-set to implement user-pay charges

Slide 15

slide16

Mr. P. Chidabaram, Finance Minister

“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. ……….”

[Speaking at the Infrastructure Seminar, Vigyan Bhawan, New Delhi , 7th October’06]

Slide 16

slide17

Welcome !

The Indian Infrastructure Sector welcomes participation across all areas by Japanese companies:

  • Advisory
  • Engineering
  • Project Management
  • Project Development
  • Construction
  • Financing
  • Operations & Maintenance

Slide 17

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