BASE FLUX

INFRASTRUCTURE AS A GROWTH ENGINE

Presented by: Sanal Anjickal Anjali V Mohan

PRESENT SCENARIO OF INDIAN ECONOMY

GDP Inflation IIP INDIAN ECONOMY Population No Market Penetration Business environment

WHY INFRASTRUCTURE ?
Sustainability refers to the actions taken today that will not diminish the prospects in the future. Infrastructure is a long term proposition, and the decisions made and implemented today, reverberates into the future. Infrastructure and inclusive growth. E.g.MNREGA Investment in infrastructure boosts the economic development of any country. Infrastructure development creates production facilities, reduces transaction costs and generates employment in large scale. Significant infrastructure development is required to sustain a growth rate of 8-9% per annum in the long term

CURRENT STATE OF INFRASTRUCTURE

India needs infrastructure facilities to unleash the true potential and meet the growing demand. India spends 4.7% of GDP on infrastructure, compared to 8.5% of GDP in China and 2.6% in the U.S . Problems plaguing the development of the infrastructure sector. The private sector accounts only for 30 % of investments in infrastructure. 11 th Five year plan 42% of projects delayed which has led to cost increasing by 16%. India's less spending on real estate, power, telecommunications, construction, and transportation prevented the country from sustaining very high rates of growth.

COMPONENTS OF INFRASTRUCTURE
Power Roads and highways Ports Aviation Telecommunications Railways Oil and gas pipeline Water supply & sanitation Storage

POWER
Power is one of the most critical components of infrastructure affecting economic growth and production activities of a country. Growth in capacity since independence 12600%. Installed capacity of 211.766 GW as of January 2013. Installed capacity of 22.4 GW of renewable technologies. 12% 9% 3% In 2011, 300 million Indian citizens 57% 19% had no access to electricity which Coal rd included 1/3 rural population and Hydrpower Renewable Energy 6% of the urban population.
Natural Gas Nuclear

ROADS AND HIGHWAYS

In India, 60% of freight and 80% of passenger traffic moves/travels by road. One of the largest road networks in the world aggregating around 42.4 lakh kms. The highways carry 40% of the total road traffic but only constitute 2 % of the total road network. The National Highway Development Programme(NHDP) is the primary infrastructure program being undertaken in the country. The coveted and all-important Golden Quadrilateral and the North-South & East-west are the pet projects underway.

PORTS
India has a long coastline of 7517 Km which runs along the western and the eastern mainland. 12 major ports and 187 minor ports. 95% of the countrys trade by volume and 75 % of the countrys trade by value moves by maritime transport. National Maritime Development Programme. Investment of INR 1280 Bn in major & INR 1680 Bn in minor ports - 80% by private sector Cargo volumes in India are expected to cross 2 bn mark by the end of 2016-2017. The cargo traffic has increased at a CAGR of 8.1 %.

CORRELATION
Independent Variable: Ports ( 20 Foot equivalent units) Roads and Highways( Kms paved) Power ( Installed capacity)

Dependent variable : Gross Domestic product.

Figure 1.1 Correlation of Port Traffic and GDP Traffic Traffic Pearson Correlation Sig. (2-tailed) 1 GDP .

976** .000

GDP

Pearson Correlation Sig. (2-tailed) N

.976** . 000 9

**. Correlation is significant at the 0.01 level (2-tailed).

Figure 1.2 Correlation of Roads Paved and GDP KM KM Pearson Correlation Sig. (2-tailed) Sum of Squares and Cross-products Covariance N GDPR Pearson Correlation Sig. (2-tailed) Sum of Squares and Cross-products Covariance N **. Correlation is significant at the 0.01 level (2-tailed). 1.588E12 1.984E11 9 .985** .000 9.082E11 1.135E11 9 5.356E11 6.695E10 9 1 GDPR .985** .000 9.082E11 1.135E11 9 1

Figure 1.3 Correlation of Capacity installed and GDP GDP2 GDP2 Pearson Correlation Sig. (2-tailed) Sum of Squares and Cross-products Covariance N Capacity Pearson Correlation 4.536E11 7.560E10 7 .869* 1 Capacity .869* .011 4.781E10 7.968E9 7 1

Sig. (2-tailed)
Sum of Squares and Cross-products

.011
4.781E10 6.675E9

Covariance
N

7.968E9
7

1.113E9
7

CHALLENGES AND SUGGESTIONS

PORTS
Challenges:
Time lag in setting up new projects. Inadequate cargo handling equipments. Lack of IT solutions at ports longer turnaround time of cargo. Pro-Privatisation policies.

Suggestions:
Cabotage law to be abolished.

Reducing cargo handling time.

ROADS AND HIGHWAYS

Challenges
Financing. Land Acquisition. Clearances.

Suggestions
LARR bill . EPC in addition to PPP. IDFs and Infra Bonds.

Poor responses from private contracts.

POWER
Challenges
Shortage of coal supply. Bleeding electricity boards.

Suggestions
Securing fuel supplies. Installing smart grids.

Operational and technical efficiency.

Capacity addition.

CONCLUSIONS .
A massive investment of US$ 1 trillion. Change in the way we approach infrastructure development. 50 % of investment by private sector. This can put Indian economy on high growth trajectory.

THANK YOU