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Infrastructure spending to double

business Updated: Jun 06, 2009 00:48 IST
Hindustan Times
Infrastructure spending to double

The government is planning a raft of new measures to pitchfork investment in infrastructure to about 9 per cent of gross domestic product (GDP) in the next five years.

The measures would include making it attractive for banks to lend to long gestation infrastructure projects, develop a deeper bond market powered with tax breaks and incentivise insurance companies to park funds in infrastructure firms through debt instruments.

An estimated investment of $500 billion (Rs 23 lakh crore) is required to upgrade India’s roads, highways, ports and airports in the next five years. This is more than 10 times the current level of investment in infrastructure projects.

Apart from making investment in infrastructure more attractive, the government is also planning to put in place a monitoring mechanism with stringent penal and regulatory powers to ensure timely execution.

A senior government official, who did not wish to be identified, said the objective is to ensure that total investment in infrastructure projects reach a level of 9 per cent of the country’s gross domestic product by 2014.

At present, the total investment in infrastructure — government and private sector —is about 4.5 per cent of the gross domestic product.

The rising hesitation of banks to lend to infrastructure projects has rung alarm bells in the government.

Several critical current and planned projects could get delayed by several months for want of funds.

Data collated by the finance ministry have shown that banks are charging above 15 per cent interest rates. In the last one year, interest rates for infrastructure projects have gone up by a couple of percentage points.

“The objective is to ensure that banks lend at a stable rate for infrastructure projects,” said the official.