India set for flood of infrastructure investment

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BANGALORE, India, Nov 6 (AFP): India is set for a flood of investment in highways, ports, airports and power plants as foreign funds tap opportunities in its deficient public works, Ernst and Young says in a report.
"We expect private investments in infrastructure projects in India to cross the four trillion rupee (101 billion dollar) mark in the next five years," said Kuljit Singh, partner at the Indian unit of the consultancy.
"Infrastructure is key to growth in emerging markets around the globe and private investors are eager to support it," Singh said in the report received Tuesday.
Investment in roads, railroads, water utilities, energy, ports and airports is expected to equal nine per cent of national economic output by 2012, up from five per cent now.
The lack of a "master plan" has limited India's ability to attract investment in infrastructure to keep pace with its economic growth, now running at a yearly nine per cent, the report said.
Still, India's need for private capital in public works is opening up opportunities for foreign investors.
The shabby infrastructure is seen by economists as the main impediment to accelerating the pace of economic growth in a nation of 1.1 billion people and closing the gap with neighbouring giant China.
Power outages are common, water supply rationed, loading and unloading of freight at the ports is woefully slow and planes have to often circle airports for an hour awaiting landing slots.
In Bangalore, India's computer-software capital, it can take two hours for programmers to be bussed over 20 kilometres of pot-holes and chaotic traffic to the immaculate campuses of companies such as Infosys, Wipro and Mindtree.
India, its government's budget already overstretched, has been courting foreign and domestic private investment in infrastructure that has been slow in coming, as investors chased quick returns in sectors such as consumer goods.
Unlike China, which already had the infrastructure in place to spur rapid economic growth, India is trying to refurbish and reinforce its public works to keep up with economic expansion.
"India's challenge is not only to improve its existing infrastructure, but also to build new infrastructure to keep pace with its rapid economic growth and remain competitive," said Jayesh Desai, a director at Ernst and Young.
"Ondia's capital needs are so great it will require substantial private investment of approximately 100 billion dollars that spells opportunity for global investors," Desai added.
Foreign investors such as private equity funds from the US and Europe are attracted to India by a risk-returns ratio comparable with developed markets, said Desai. The average rate of return on infrastructure projects is about 14 per cent to 20 per cent, he said.