India, ranked below war-ravaged Ivory Coast for the quality of its infrastructure, is planning to set up a 500 billion rupee (US$11 billion) debt fund to build ports, roads and bridges needed to drive economic growth.
“The modalities are being worked out,” Montek Singh Ahluwalia, a top government adviser, said in a telephone interview from New Delhi. “The idea is to refinance lending institutions. We are talking to the World Bank and other multilateral agencies.”
India doubled its target for infrastructure spending to US$1 trillion in the five years starting 2012 to narrow the gap with China, the world’s fastest growing major economy. The fund is the latest attempt by the government to raise capital from overseas after a US$5 billion fund planned in 2007 with Citigroup Inc and Blackstone Group LP was shelved.
The fund is a “good start, but it won’t be enough,” said Prasanna Ananthasubramaniam, chief economist at ICICI Securities Primary Dealership Ltd in Mumbai. “One fund cannot take all the risks of infrastructure projects.”
India spent 6.5 percent of its GDP last year on infrastructure, compared with about 11 percent by China, according to an Ernst & Young India report. Failure to lift investment may imperil Prime Minister Manmohan Singh’s target of boosting economic growth to 10 percent, needed to pull 828 million people living on less than US$2 per day out of poverty.
Ahluwalia, deputy chairman of the nation’s Planning Commission, said in a report in March that India may need as much as US$1 trillion in such investment between 2012 and 2017.
Global funds including 3i Group PLC have invested in India’s ports and power plants. Macquarie Group Ltd, Australia’s biggest investment bank, and State Bank of India, the nation’s largest lender said last year that they raised US$1 billion to invest in the South Asian nation’s infrastructure.
Citigroup, based in New York, said in May 2008 it had raised US$500 million to build ports, roads and utilities. The finance ministry in February 2007 announced the formation of the US$5 billion infrastructure fund with Citigroup and Blackstone.
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