Indian budget confirms US$ 1 trillion infrastructure plans

[Shaitan]

India's budget for 2012-13 has confirmed the commitment to spend INR 50 trillion (US$ 1.2 trillion) on infrastructure over the duration of the 2012 to 2017 five-year plan. Half of this investment is expected to come from the private sector, and the government has announced a series of measures to facilitate this investment.

Among the initiatives, the government will allow new sectors to qualify for Viability Funding Gap (VFG) money to make them more attractive to private investors. Sectors such as irrigation, oil & gas infrastructure and fixed telecommunications networks are now eligible for this 'seed money' to finance the early stages of work.

The government also proposes to increase the availability of tax-free bonds to INR 60000 crore (US$ 12 billion) per year in the infrastructure sector, INR 10000 crore (US$ 2 billion) of which will be available to National Highway Authority of India (NHAI) projects.

Earlier this month the government set up an Infrastructure Debt Fund to attract overseas investment in Indian infrastructure. In his budget speech finance minister Pranab Mukherjee said this now stood at INR 8000 crore (US$ 1.6 billion).

Although the budget has been generally welcomed in India, some commentators have questioned the government's ability to attract US$ 500 billion of private investment in the infrastructure sector over the next five years. Anand Sundaresan, managing director of Schwing Stetter India said, "50% of this [US$ 1 trillion infrastructure investment] has to come through Public Private Partnership projects as against 30% in the 11th five-year plan. We have not achieved the PPP target of the 11th five-year plan, therefore, if the government wants to attract private investors for the PPP projects, the necessary reforms and policy changes should be brought in immediately."

Indian budget confirms US$ 1 trillion infrastructure plans - KHL Group

 

[Zebra]

India needs to raise infrastructure spending to 10% of GDP : IDFC Projects .

5 May, 2012, 02.07PM IST, PTI

MANILA : 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 $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 $1 trillion investment in the sector.

Of the total targeted investment, private sector is expected to invest $500 billion - with around $350 billion through debt and $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 $500 billion.

Total investments during the past five years was about $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 $60 billion.

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

India needs to raise infrastructure spending to 10% of GDP: IDFC Projects - The Economic Times

 

[SLASH]

So which infra stocks should be investing in? Punj Lyod and L&T come to mind.

 

[Godless-Kafir]

Already inflation is on the high, what is going to happen to our prices? Its going to be uncontrollable!

 

[Neil]

Already inflation is on the high, what is going to happen to our prices? Its going to be uncontrollable!

but its the only way u can expand and grow your economy to massive extent in the current scenario...

 

[sesha_maruthi27]

How in the first place did INDIA get US $ 1 trillion when INDIA is suffering from drought, poverty, malnutrition and also a huge deficiency in DEFENCE and SECURITY........

 

[nrj]

How in the first place did INDIA get US $ 1 trillion when INDIA is suffering from drought, poverty, malnutrition and also a huge deficiency in DEFENCE and SECURITY........

Whats that got to do with raising capital from private sector or on PPP/JV model ?

 

[sesha_maruthi27]

NRJ bhai, I mean to say that when INDIA is suffering from these conditions and as S&P says that INDIAN market is in down fall, how and from were will the money and the will to invest come from?

 

[nrj]

Well even after the downgrade, investment hasn't slowed down. FDI is increasing & institutional investors are also being roped. Mostly the americans will be investing in infrastructural projects. Its just that the bureaucratic clearances are the biggest worry right now.

 

[SLASH]

Already inflation is on the high, what is going to happen to our prices? Its going to be uncontrollable!

The Rupee will further depreciate. This means oil will become more expensive and thus would affect the every other commodity. But we have spent $425 billion in the past five years in this sector. That would mean that there is going to 10% compounded growth in spending on infrastructure in this 5 year plan. We need this growth in infrastructure to place us ourselves as a preferable destination for manufacturing. More manufacturing would mean more supply. more supply would mean reduction in prices.

 

[sob]

One just has to look at the progress in the NHAI contracts and then you can understand the seriousness of this govt. on infrastructure projects. They are only interested in giving out dole with an eye to the 2014 elections.

 

[SLASH]

One just has to look at the progress in the NHAI contracts and then you can understand the seriousness of this govt. on infrastructure projects. They are only interested in giving out dole with an eye to the 2014 elections.

i agree. The projects have taken time. But money is being spent. An increase in 8-10% in infrastructure budget is only natural. Good thing is that more private money will be flowing into the project. That would mean less money being siphoned off better utilisation of Rs.

 

[ejazr]

NRJ bhai, I mean to say that when INDIA is suffering from these conditions and as S&P says that INDIAN market is in down fall, how and from were will the money and the will to invest come from?

Well if you look at the data, 2010-2011 was one of the best years for FDI on record

What slowdown? FDI inflows hit record $50 billion - Economic Times

Just for the month of Feb 2012, the year on year growth of FDI inflows was 74%
http://www.indianexpress.com/news/fdi-up-74-in-feb-to-2.21-bn/938374

 

[sesha_maruthi27]

More FDI means the value of RUPEE will fall even down, this is not good for INDIA.

 

[SLASH]

More FDI means the value of RUPEE will fall even down, this is not good for INDIA.

The value of the rupee is at 53.50 to a dollar. I think the government has purposely done so to attract FDI. The problem is that a chunk of the money is going into real estate which is inflating the property prices. A common man dream of buying a house is a distant dream at the moment. we need a major correction in the market. Ghost towns in India is not to far away.