India needs investment in infrastructure

In the 11th Five Year Plan period from 2007-2012, $ 425 billion was invested in overall infrastructure, which fell short of the planned $500 billion. The private sector was expected to contribute 50 per cent of this capital. During this period, the private sector played an unprecedented role in terms of its contribution to the development of airports which, with one exception at Cochin, had previously been the exclusive domain of the state-owned airport operator. Total investment by private airport operators in the construction of greenfield airports at Bengaluru and Hyderabad, and the modernisation and expansion of Delhi and Mumbai airports, totalled 300 billion.

The Airports Authority of India (AAI) invested 125 billion in upgrading Chennai, Kolkata and 35 non-metro airports. India’s 12th Five Year Plan from 2012-2017 was initially expected to see planned infrastructure investment of US$1 trillion. However, this assumed an average GDP growth rate of 9 per cent per annum. With recent moderation to below 7 per cent and the likelihood that growth will remain below target for the next 12-18 months, planned expenditure has been reduced to $800 billion. Estimated investment in the airport sector is set at 675 billion of which almost 75 per cent is expected to be contributed by the private sector. Domestic funding will not be sufficient to support this level of activity. But if foreign investment is to be attracted, India will need to provide external capital with greater confidence with respect to market risks.