India's infrastructure has been expanding at a rapid pace to support the economic growth rate of over 9 per cent. The six core-infrastructure industries, which account for a combined weight of 26.68 per cent in the index of industrial production (IIP), registered a growth of 8.6 per cent in 2006-07 as against 6.2 per cent during 2005-06.

On the back such a robust growth in the previous year, the six core infrastructure-industries index rose by 5.6 per cent during April-February 2007-08. Significantly, electricity generation, petroleum refinery production and cement production grew by 6.6 per cent, 7.2 per cent and 7.5 per cent, respectively.

Growth Potential

According to the consultation paper circulated by the planning commission, a massive US$ 494 billion of investment is proposed for the eleventh plan period (2007-12), which would increase the share of infrastructure investment to 9 per cent of GDP from 5 per cent in 2006-07. This translates roughly into US$ 40 billion annual additional investment.

The projected sector-wise shares are: 30.4 per cent in electricity, 15.4 per cent in roads and bridges, 13.7 percent in telecommunications and 12.4 per cent in railways among others. Significantly, 30 per cent of the total investment is expected to come from the private sector (including public-private partnership).

For this, the government has already enacted many proactive measures like opening up a number of infrastructure sectors to private players, permitting FDI into various sectors, introducing model concession agreements, taking up new projects like the National Highway Development Project, National Maritime Development Programme among others. Some of the projects planned for the next five years include:

• Additional power generation capacity of about 70,000 MW
• Constructing Dedicated Freight Corridors between Mumbai-Delhi and Ludhiana-Kolkata
• Capacity addition of 485 million MT in Major Ports, 345 million MT in Minor Ports
• Modernisation and redevelopment of 21 railway stations
• Developing 16 million hectares through major, medium and minor irrigation works
• Modernisation and redevelopment of 4 metro and 35 non-metro airports
• Six-laning 6,500 km of Golden Quadrilateral and selected National Highways
• Constructing 1,65,244 km of new rural roads, and renewing and upgrading existing 1,92,464 km covering 78,304 rural habitations

Investment

With such huge opportunities opening up in this segment, private investment has been growing at a scorching pace. Already, telecommunications, construction and power together have attracted a combined cumulative foreign direct investment of US$ 7.553 billion over the period April 2000 to December 2007. In fact, these three account for about 16.68 per cent of the total FDI in to the country during this period.

Significantly, India Inc invested an overwhelming 81 per cent of their planned total investment of US$ 104 billion during April-December 2007-08 in developing core, physical and service infrastructure. While steel (US$ 31 billion) accounted for the largest share of total investment, other industries attracting substantial capital expenditure include oil (US$16 billion), power (US$ 13 billion), telecom (US$ 8.2 billion), real estate (US$ 6.2 billion) and cement (US$ 4.8 billion), among others.

The Central public sector enterprises in infrastructure sectors have also recorded a 32.69 per cent in their planned investments to US$ 37.04 billion for 2008-09 over 2007-08.

Simultaneously many India dedicated infrastructure funds are coming up. In fact, infrastructure has been instrumental in India emerging as the leading destination for private equity in Asia (excluding Japan). Some of the major players in this segment include 3i, Citigroup, Blackstone Atherstone India Invest, PFC, AMP Capital, Macquarie Infrastructure Group, DLF-Laing O'rourke among others. Funds raised through infrastructure schemes by mutual funds are likely to exceed US$ 5.07 billion in 2007 against US$ 634.69 million in 2006. In fact, eight of the Lipper's world's top ten infrastructure funds in 2007 were Indian equity funds.