India : Perspective On Infrastructure Investments

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India Perspective On Infrastructure Investments
by

• Vinayak Chatterjee

Tokyo May, 2007
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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
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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
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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 October06, Chairing a meeting of the
  Planning Commission, the Prime Minister set a
  target of 9 average economic growth for the 11th
  Plan.

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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
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Investments Required in Infra in Next 5 Years
A Scenario
(US Billion)
Last Year
This Year
NEXT 5 YEARS(11TH PLAN)
2005-06
2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
Total 5 Years
GDP Growing _at_ 9 p.a.
718
1204
1105
1014
930
853
783
GCFI Required as of GDP
5
8
7
7
6.5
5.5
5.5
GCFI Required
350
96
77
70
60
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GDP 2005-06 (Market Prices) was Rs.3231,000
Crores US 718 Billion
GCFI Gross Capital Formation in
Infrastructure
Slide 6
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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
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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 development assistance

Slide 8
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Perspective on Indian Infra Funding Sources
(US Billion)

Amount
100
350
Resources to be organized for infra investments
in 11th Plan Period
20
70
From Private Capital (Domestic and FDI)
10
35
From World Bank, ADB, JBIC and other
multilateral/bilateral agencies
70
245
From Public Expenditure
Slide 9
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Sectoral Requirement of Funds
(US Billion)
Amount

Sector
PPP Possibilities
34
120
Energy
67
19
Railways
49
14
Nat Highways
18
5
Irrigation
9
3
Airports
11
3
Ports
274
78
Envisaged
76
22
Others
350
100
Total
Telecom, Tourism, SEZs Townships, Supporting
Urban Infrastructure, Water Sanitation, State
Rural Roads, Logistics etc.
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Key Imperative ONE Private Sector

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

Slide 11
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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.

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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.

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Key Imperatives Four Long Term Financing

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

Consider innovative means to use forex reserves.
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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
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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 October06
Slide 16
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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