India projects up to 30% funding gap in infra investment

Lalit K Jha

Washington, June 22 (PTI) India requires USD one trillion
in the next five years to create infrastructure -- key to nine
per cent plus growth -- but expects a funding gap of up to 30
per cent that it wants bridged by American investors.
"To sustain a growth rate of nine per cent, estimates
indicate that investment in infrastructure will have to be of
the order of USD one trillion over the next five years...
"With a potential funding gap of 25-30 per cent, needing
to be bridged through innovative modes of financing," Inuida's
Finance Minister Pranab Mukherejee said at separate meetings
with the industry shortly after his arrival here on Monday.
He hoped that US companies would come forward to help
India bridge this gap.
The Indian economy is expected to grow by 8.5 per cent
this fiscal, up from 6.7 per cent in 2008-09 after the 2008
global economic crisis. In the three years preceding 2008-09,
the country's economy had expanded by over nine per cent.
"When I took over as the Finance Minister, my primary
concern was how to prevent the further deterioration of the
growth," he said, in identical remarks, at separate meetings
organised by the Institute of International Finance and the
Confederation of Indian Industry.
High inflation has, however, become a cause of concern
for the government, which is now betting on good monsoon for
the rate of price rise to ease. Headline inflation for May
provisionally crossed the double digit level.
He hoped that once it is clear that monsoon is normal,
inflationary pressure would start to ease from mid-July.
Monsoon accounts for 80 per cent of rains India receives
and 60 per cent of the area under cultivation is rain-fed.
Last year, the country's crop production was hit owing to poor
rains, leading to an upward spiral in food prices.
The government has separately been pushing financial
sector reforms to sustain high growth, and a bill to increase
foreign direct investment cap in insurance sector is awaiting
passage. Allowing infrastructure firms access to insurance
funds was a key suggestion of a panel headed by Deepak Parekh
in 2007.
"We do agree that it (reform) has been delayed,"
Mukherjee said, attributing the delay to consensus building.
During the last five years, India has initiated reforms
in direct and indirect taxes, and is working closely with
state governments, he said.
The Finance Minister said India's economic fundamentals
are strong, giving rise to a well grounded optimism for medium
and long-term prospects and noted that relatively high Savings
and Investment rates should sustain a high growth momentum in
the coming decades.
India's savings and investment rate is a healthy 35 per
cent of GDP, second only to China's over 40 per cent. PTI LKJ
MRD