'India Infrastructure Investment' an ambitious reform programme, involving a

paradigm shift of stance from insulated to an open market economy. Indian economy is

now feeling the heat of basic infrastructure constraints, both physical and human. Until

very recently, the bulk of infrastructure was in the government sector. Public sector in

India operating in a protected set up has been largely subsidized by the Government.

There is one area where there is a need for private sector and foreign investment to

come in. Infrastructure projects have long gestation period, and many social

implications. Thus, India Infrastructure Investment schemes should be attractive.

Clearly, there is a wide gap between the potential demand for infrastructure for high

growth and the available supply. This is the challenge placed before the economy, i.e.

before the public and private sector and foreign investors. This can also be seen as an

opportunity for a widening market and enhanced production.

It is no secret that the Indian infrastructure holds great potential, not least because of the

dire need to bring Indian roads, ports and airports up to world standards but also because

of the keen national interest in the sector. In order to increase the growth rate in

infrastructure, recent annual budgets of the Indian Government supported by various

State Governments further encourages investment in the sector. Private sector

participation is seen as key to the development and implementation of projects across the

country.

As per the national spending plan under the Eleventh Five Year Plan (2006-2007 to 2011-

2012), a sum of US$ 354 billion is required to be spent in various infrastructure projects.

Such projects are being implemented under Public Private Partnership (PPP) and many
projects will be implemented through foreign investments. To achieve long term growth,

the Government of India has set an ambitious target of increasing total investment in

infrastructure from 5% of GDP in the base year of the Plan 2006-07 to 9% by the year

2011-2012.

Based on the plan, around 30% of the required investment of around Rs. 2,056,150

Crores (US $ 154 billion) is required to be invested through private capital. Such capital

is expected to be invested through debt and equity by the private sector under PPP

projects.

According to Mr. Pranab Mukherjee, the Indian Union Minister for Finance, India needs

to develop a rupee-denominated long term bond market for funding the infrastructure

sector that requires an investment of around US$ 459 to US$ 500 billion by 2012. The

recent move by the government to issue tax-free infrastructure bonds and US $11 billion

debt fund will help the government get about US$ 1 trillion target by 2017. Therefore,

infrastructure investment in India is expected to grow dramatically under the Twelfth

Five Year Plan (2012-2013 to 2016-2017).

As per public data, the cargo growth in India has been increased to the extent of 5.5% as

compared to the 2009 fiscal year. The airports and roads sector have seen an increase in

domestic air traffic to the extent of 22%. India has also set a target of adding 78,000

megawatt (mw) of power generation capacity over the five years ending March 2012. As

on June 2010, it has added only around 30,000 megawatts.

There is little doubt that, in the face of such demands within the infrastructure sector, the

Government of India is very serious in its commitment to implement infrastructure

projects. A committee on infrastructure was formed under the leadership of the Prime

Minister of India to review the development of such projects, namely power, road, ports,

civil aviation and railways and opportunities in such sectors on a quarterly basis.

With every opportunity however, there is often a challenge to overcome. Whilst

opportunities in the Indian infrastructure sector abound, there is no doubt that interested

investors must take heed of legal and practical implications of venturing into this area.

Indian Infrastructure

The best barometer of country’s economic standing is measured by its GDP. India, the

second most populated country of more than 1100 million has emerged as one of the

fastest growing economies. It is a republic with a federal structure and well-developed

independent judiciary with political consensus in reforms and stable democratic

environment .In 2008-09 India’s economy-GDP grew by 6.5% due to global recession. In

the previous four years,economy grew at 9%.The Indian economy is expected sustain a

growth rate of 8% for the next three years upto 2012. With the expected average annual

compounded growth rate of 8.5%, India's GDP is expected to be USD 1.4 trillion by 2017

and USD 2.8 trillion by 2027. Service sector contribute to 50% of India‘s GDP and the

Industry and agriculture sector 25% each.

Investment Opportunities In Indian Infrastructure

Huge Infrastructure Investments

on the Anvil…

In order to sustain this rate of economic growth, India’s Planning Commission has

estimated that
investment in infrastructure - defined broadly to include road, rail, air and water

transport, electric power, telecommunications, water supply and irrigation - would need

to increase from 4.6 per cent of GDP to between 7-8 per cent during the Eleventh Plan

period (2007-2012), which would entail an outlay of almost US$ 320 billion over the

Plan period. Investment requirements in some key sectors are:

• US$ 50.8 billion for modernisation

and upgradation of highways

• US$ 9.25 billion for civil aviation

• US$ 11.5 billion for ports

• US$ 69.39 billion for railways

There are several indicators in the economy today which point to the huge investments

being made by both the Government and the private sector in infrastructure development.

• India's construction equipment sector is growing at over 30 per cent annually

• The order books of the 10 largest construction companies in India have swelled by over

50 per

cent year-on-year

• Annual cement consumption has breached the 150-million tonne mark for the first time.