The Role Of Infrastructure In Pushing India To $5 Trillion Economy
India is gearing itself to increase the size of its economy to five trillion dollars in the next five years and a ten trillion dollar economy in the next eight years thereafter. The pivotal role of infrastructure in this ambitious venture can hardly be gainsaid. India has been spending much more than one trillion dollar per annum on infrastructure, as per a response in Parliament in the just concluded session. The Minister of State for Finance Mr. Anurag Singh Thakur said this in the Lok Sabha. He said that the budget estimate of government expenditure on infrastructure in 2018-19 was 5.97 trillion rupees.
The objective to grow the domestic economy to five trillion dollars by 2025, though seems stupendous, is well within realization. The proactive steps of promoting infrastructure and putting them in place being undertaken is a pointer to this. The extant state of the economy is 2.8 trillion dollars, this would call for compassing an annualized rate of 8 per cent over the next five years. This is a credible goal, given that the Indian economy even in its slowdown state, had grown in the range of 6-7 per cent in the recent past, experts contend. The Economic Survey preceding the budget and the Finance Minister Nirmala Sitaraman in her budget speech acknowledged the need to revive “animal spirits” to spur the virtuous cycle of investment, jobs, productivity, exports, consumption and growth.
The latest Monetary Policy Committee of the Reserve Bank of India, settled on an unconventional 35 basis point cut in the bank lending rate to the borrowers of the real sectors in the economy this week. With this, the apex bank has cut rates in four successive policy announcements since February this year, totaling a 110 basis points, thereby signaling its intent to do the heavy lifting to keep credit flows into the productive segments so that economic activities, in general and infrastructure ones in particular, get accelerated.
The correlation between infrastructure investment and economic growth in the country is very high. The correlation of investments in inland, road, rail and airport infrastructure to GDP (gross domestic product) are higher than 0.90 indicating that there is a strong synergy between GDP and investment in infrastructure. That is the reason why the National Democratic Alliance (NDA) government has been focused on investing in infrastructure right from its innings in 2014, as also in the earlier NDA stint during Vajpayee government, to build national highways under the ‘Golden Quadrilateral’.
The government is guided by the universally acknowledged canon that the very success of social and economic transformation of an economy undoubtedly depends on providing and extending inclusive and sustainable infrastructure amenities to the people. No wonder the outlays on physical infrastructure through public investment and inducements to private sectors to participate in long-gestation infra projects in inlands, rail, road and airports went up by leaps and bounds in recent years.
Steps taken to boost private sector investment in infra sector include launch of innovative financial vehicles such as Infrastructure Debt Funds, Infrastructure Investment Trusts (InvITs), Real Estate Investment Trusts (REITs) and mainstreaming Public-Private partnerships across infrastructure sectors through viability gap funding and periodic review of Harmonized Master List of Infrastructure sub-sectors.
With the objective of boosting investment in infrastructure, National Investment and Infrastructure Fund (NIIF) was set up with a capital of roughly 400 billion dollars to provide investment opportunities to commercially viable projects in the country. Recently, Australia’s largest superannuation fund as well as Canada’s Ontario province have each signed agreements to invest upto one billion dollar with the NIIF Master Fund. This latest bout of investment proposals in the NIIF, which was set up in 2015, to spur long-term investments, would markedly help improve infra financing. This year’s union budget has provided a decisive push to infrastructure development with the aim to invest Rupees 100 lakh crore in infrastructure over the next five years.
Script: G. Srinivasan, Senior Economic Journalist
The latest Monetary Policy Committee of the Reserve Bank of India, settled on an unconventional 35 basis point cut in the bank lending rate to the borrowers of the real sectors in the economy this week. With this, the apex bank has cut rates in four successive policy announcements since February this year, totaling a 110 basis points, thereby signaling its intent to do the heavy lifting to keep credit flows into the productive segments so that economic activities, in general and infrastructure ones in particular, get accelerated.
The correlation between infrastructure investment and economic growth in the country is very high. The correlation of investments in inland, road, rail and airport infrastructure to GDP (gross domestic product) are higher than 0.90 indicating that there is a strong synergy between GDP and investment in infrastructure. That is the reason why the National Democratic Alliance (NDA) government has been focused on investing in infrastructure right from its innings in 2014, as also in the earlier NDA stint during Vajpayee government, to build national highways under the ‘Golden Quadrilateral’.
The government is guided by the universally acknowledged canon that the very success of social and economic transformation of an economy undoubtedly depends on providing and extending inclusive and sustainable infrastructure amenities to the people. No wonder the outlays on physical infrastructure through public investment and inducements to private sectors to participate in long-gestation infra projects in inlands, rail, road and airports went up by leaps and bounds in recent years.
Steps taken to boost private sector investment in infra sector include launch of innovative financial vehicles such as Infrastructure Debt Funds, Infrastructure Investment Trusts (InvITs), Real Estate Investment Trusts (REITs) and mainstreaming Public-Private partnerships across infrastructure sectors through viability gap funding and periodic review of Harmonized Master List of Infrastructure sub-sectors.
With the objective of boosting investment in infrastructure, National Investment and Infrastructure Fund (NIIF) was set up with a capital of roughly 400 billion dollars to provide investment opportunities to commercially viable projects in the country. Recently, Australia’s largest superannuation fund as well as Canada’s Ontario province have each signed agreements to invest upto one billion dollar with the NIIF Master Fund. This latest bout of investment proposals in the NIIF, which was set up in 2015, to spur long-term investments, would markedly help improve infra financing. This year’s union budget has provided a decisive push to infrastructure development with the aim to invest Rupees 100 lakh crore in infrastructure over the next five years.
Script: G. Srinivasan, Senior Economic Journalist
Comments
Post a Comment