‘Infra funding may touch 9% of GDP’
Financial Express

Private investment in infrastructure in India is poised to grow to about 9% of the GDP from the current 5% by 2012. However, as the country looks to increase investments in building and upgrading its public infrastructure that can sustain the massive economic and population growth, its ability to attract such investment from private sources has been limited due to the lack of a National master plan for infrastructure development across all sectors, says an Ernst and Young report released on Monday.

“India’s capital needs are so great that it will require a substantial private investment of approximately $100 billion that spells opportunity for global investors. Its challenge is not only to improve its existing infrastructure, but also to build new infrastructure to keep pace with its rapid economic and population growth as well as remain competitive in the global market,” says Jayesh Desai, national director, transaction advisory services, Ernst & Young India.

The report titled ‘Investing in Global Infrastructure 2007: An Emerging Asset Class” provides an in-depth look at eight countries including India and China and estimates that private sources can account for 10-15% ($240-360 billion) of the capital needed for infrastructure projects annually worldwide.

According to the report, private investments in infrastructure projects in India will cross Rs 4 trillion mark in the next five years. “Foreign investors are mostly interested in investing in highway and port sectors. They have been cautious about investing in sectors that are still heavily regulated by the state and local governments, with water being a prime example,” it says.
Global investors in India’s infrastructure market are mainly private equity funds and other investors who are mostly from the US and EU, whereas the market’s developers and contractors are mainly from Asia, Australia and EU. However, Desai feels that foreign investors are comfortable with the idea of investing in Indian infrastructure, as the risk returns ratio is comparable with that of most other developing Markets.

“The average internal rate of return on infrastructure projects in India is about 14-20%. India is still believed to be a good investment destination among the US and EU investors despite lack of standardized procedures in attracting private investment.