According to World Bank group’s Global Monitoring Report 2007, nearly 34% of India’s population lives on less than $1 per day. India’s focus going forward on rural-based sectors and infrastructure to ensure its growth will be sustainable in the long run is indeed much needed. Recent spend increases on health, education and rural infrastructure are part of India’s strategy to spread the benefits of economic growth more evenly and be increasingly inclusive towards India’s poor.
India needs to invest, as per Planning Commission estimates, $320 billion over the next five years, nearly 30% or $100 billion of which is expected to come from the private sector, to increase infrastructure investment to the required level. Private infrastructure investments in India, during the period between 2001 and 2005, have been less than 1% of its GDP, as compared to 2-3% of GDP in countries such as Brazil, Chile, and Malaysia.
Policy makers in India are fully cognizant of the infrastructure gap and its potential impact on long term growth. There is also a need to supplement domestic capital with global capital from FDI and long-term institutional investors. This means a quantum jump in investments from strategic investors, construction firms, local and foreign developers and financial intermediaries, private equity investors, infrastructure funds and insurance and pension funds.
A key problem being faced in India with regard to infrastructure today is the absence of bankable projects. IFC is setting up an Infrastructure Advisory Services Facility with donor support to develop bankable PPPs in close partnership with government agencies at the central and state levels; help create model PPP arrangements in newer sub-sectors and increase access to infrastructure services in the South Asia region.
This year IFC also doubled its committed portfolio in the infrastructure sector, to $600 million. Investments ranged from natural gas to wind power, and from port services to a facility for developing public-private projects in infrastructure sector. Key investments in infrastructure this year included GSPL, MSPL, Lanco, Ocean Sparkle, etc.
To be able to partner India towards a more sustainable and inclusive growth, IFC is also enhancing its focus on private investment in agribusiness, rural finance and rural infrastructure to boost rural economic growth.
In the financial year ending June 30, 2007, private sector projects worth $3 billion were supported as a result of IFC’s assistance to the Indian corporate sector. IFC’s annual investments in India this year surpassed the $1 billion mark for the first time since IFC’s founding in 1956. IFC invested more in India in FY07 than in any other country, making the India investment portfolio its second largest after Russia.
For any further inquiries, please contact the South Asia Communications Officer, Minakshi Seth, at mseth@ifc.org.
