AFP: Higher Indian growth depends on improving infrastructure: official

Wednesday December 5, 2:49 AM

Higher Indian growth depends on improving infrastructure: official

Billions of dollars must be spent to improve India's creaking infrastructure to achieve the economic growth needed to lift millions out of poverty, a top government policy advisor said Tuesday.

India's dilapidated ports, roads, power supplies and other infrastructure are a "critical constraint" to stronger growth, Montek Singh Ahluwalia, deputy chairman of the government's key Planning Commission, told the India Economic Summit.

"Investment in infrastructure in 2006-07 was five percent of gross domestic product and was inadequate. We need to increase it to about nine percent" by the financial year 2011-12 to around five billion dollars, said Ahluwalia.

India's goal of attaining 10 percent growth by the 2011-2012 financial year would be unachievable unless infrastructure spending moves into much higher gear, said Ahluwalia.
India has logged 8.6 percent average annual growth in the last four years and economists say expansion must shift to double digits to make a significant dent in deep poverty afflicting millions.

The Indian government will pick up the tab for 70 percent of the infrastructure spending but the rest -- around 150 billion dollars -- must come from private sources, Ahluwalia told the summit, part of a series of regional meetings ahead of the World Economic Forum in Davos, Switzerland in early 2008.

The meeting of financial players from around the world eager to learn about India's rapidly expanding economy has heard a litany of complaints from business leaders about the disastrous state of India's infrastructure.

The Indian government has introduced new policies to attract private sector investment and "now the scale of activity needs to increase" to compensate for India's "infrastructure deficit," Ahluwalia said.

India's high growth has pushed its shabby infrastructure to its limits. Power cuts last hours, congested ports delay loading and unloading and the nation's roads are notoriously potholed.
"Which state electricity board can guarantee continuous uninterrupted power?" asked Deepak Puri, chairman of compact disc giant Moses Baer India.

Many companies run their own captive power plants to overcome energy shortages and ensure continuous production.

Rajat Nag, managing director of the Asian Development Bank, called infrastructure India's most urgent problem.

India needs to spend as much as 1.6 billion dollars over the next decade or 10.5 to 12.5 percent of its GDP on infrastructure to keep growth on track, Nag said.

Rajiv Lall, managing director of the Infrastructure Development Finance Co., a private sector financier of Indian public works, said poor governance leading to slow decision-making was a major hurdle in drawing infrastructure investment.

He added there was also a shortage of the skills required for building civil engineering and other projects.

However, Ahluwalia said investors were showing interest in putting money into the power sector as India's states plan to introduce reforms to tackle widespread transmission and distribution losses.