India needs to raise infra spending

India needs to raise infra spending

India needs to raise infrastructure spending to 10 per cent of GDP to achieve and sustain economic growth target of 9 per cent in the coming years.

"In order to sustain growth targets, this (investment in infrastructure) would need to increase further to over 10 per cent of GDP by 2017," IDFC Projects Ltd Managing Director Pradeep Singh said in a presentation at the annual meeting of Asian Development Bank here.

India's infrastructure spending is 8 per cent of the Gross Domestic product, as against China's 9 per cent, he said. The country's GDP was USD 1.4 trillion at the end of March 2011.

Acknowledging that India has a long way to go in terms of meeting its infrastructure requirements, Singh said the 12th Five Year Plan (2012-17) envisages USD 1 trillion investment in the sector.

Of the total targeted investment, private sector is expected to invest USD 500 billion - with around USD 350 billion through debt and USD 150 billion of equity over next five years.

Domestic funding sources, Singh said, will not be sufficient to meet these needs.

However, during the 11th Plan period ended in March, investment in infrastructure sector fell short of its target of USD 500 billion.

Total investments during the past five years was about USD 425 billion, Singh said.

Despite the aggressive growth in last five years, India's basic infrastructure ranked 86th in Global Competitive Report -- 2010 by World Economic Forum, he pointed.

Projecting India as investment destination, State Bank of India Chairaman Pratip Chaudhuri said, in a separate presentation, that Qualified Foreign Investors were allowed to directly invest in Indian equity market in January.

Besides, he said, the overall FII investment limit in government securities and corporate bonds has been enhanced to USD 60 billion.

Chaudhuri also said India has a well regulated banking system, with 98 per cent of the banks fully computerised.

SOURCE: financialexpress.com