Money spent to modernise infrastructure will be among the top drivers of the country’s economic growth, finance minister Arun Jaitley said on Tuesday, adding that the world now expects India to shoulder the burden of growth after China’s slowdown.
New Delhi needs immediate investments of at least $1 trillion to build roads, ports, airports and power stations as it seeks to expand its economy and raise living standards. The government hopes private companies will contribute half the amount.
But so far it has struggled to raise enough private money, with at least $10 billion worth of road projects stuck because of difficulty in obtaining land. Many power projects remain unfinished owing to regulatory delays.
“China has shouldered almost 50% of the global growth over the last few years and with a slowdown, the ability of China to shoulder that kind of growth may not be there. Therefore, the world is also now looking for our shoulders to rest its growth on,” Jaitley told the Future of Asia conference, organised by the Japanese media corporation, Nikkei.
“And since we have a lot of infrastructural deficit, a lot of spending still to undertake, I think all that is going to be a very powerful driver of economic growth in India.”
But over the years, big banks have become increasingly unwilling to lend money to finance infrastructure projects. This has led governments to turn to pension and sovereign wealth funds.
In Tokyo, Jaitley met Japanese officials managing such corpuses, pitching India’s National Investment and Infrastructure Fund as a perfect asset match for the long-term liabilities of a pension fund. The NIIF is an investment vehicle to fund green-field, brown-field and stalled projects.
Speaking on India’s growth outlook for 2016-17, Jaitley said he was hopeful of improving up on last year’s 7.6%.
“This year the indications are that the monsoon will be a little better…with continued structural reforms, improvement in the urban demand, and the monsoon would also add to the rural demand, hopefully we would maintain this growth rate, may improve up on it somewhat,” he said.
The finance minister ruled out suggestions that India was about to replace China as a growth driver, saying it will remain a very major, influential economy given the size of its GDP.
“The world has enough space for major economies to emerge. (China) is going through a structural transition into a more consumption- oriented, more service-oriented economy. And, therefore, I think India’s growth rates have moved higher than China’s but China will always remain a very major economy,” he said.
“I have not the least doubt that an economy of that size, even with the normal that they now predict or something less than that normal, would still have a great impact both on Asia and the world.”