Private push key to $10-trillion by 2030 target

NEW DELHI: Bringing private investment in the infrastructure sector is key to India becoming a $10-trillion economy by 2030, as fiscal constraints continue to limit fund flow from public sector, said the Economic Survey 2018-19.

“For a smooth and fast travelling, India needs adequate and timely investment in quality infrastructure. In order to create a ten trillion dollar economy by 2032, India needs a robust and resilient infrastructure. Public investment cannot fund the entire infrastructure investment requirements of the country,” said the survey tabled in Parliament on Thursday.

Along with physical infrastructure, provision of social infrastructure is equally important as these two would determine where India will be placed in the world by 2030, the survey said. India needs to spend 7-8% of its GDP on infrastructure annually, which translates into annual infrastructure investment of $200 billion. However, the country has been able to spend only about $100-110 billion annually on infrastructure, leaving a deficit of around $90 billion per annum.

“Given the fiscal constraints that leave less room for expanding public investment at the scale required, there is an urgent need to accelerate the flow of private capital into infrastructure,” the survey said.

Experts said that in this situation private sector capital will need to be brought back into the infrastructure sector in a big way, but multiple constraints such as lack of availability of funds and procedural delays come in the way.

The survey further said that public-private partnerships (PPPs) are “quintessential” for addressing the infrastructure gaps in the country. Private investment in infrastructure has come mainly through PPPs. More than a third of the infrastructure investment in India in the past decade has come from the private sector, the survey said.

One of the challenges facing the private sector is to devise a comprehensive resolution option for projects which are either stuck, mid-way or awaiting settlement of arbitral disputes or claims, the survey said. “The need is to establish an institutional mechanism to deal with time-bound resolution of disputes in infrastructure sectors,” it said.

The government must look at asset recycling in airports, power and railways, just as it did for the roads sector, said Manish Agarwal, lead-infrastructure at PwC. “We have not seen sufficient change in banks coming back to lending in a big way. I think we need to put out more brownfield projects on the block,” he said. “There are many more operating assets which have lower risk and are more amenable to investors’ appetite at present. Even then, greenfield will still be a requirement but there are issues of land acquisition and permits and clearances there,” Agarwal added.