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Infrastructure key to India's growth

The infrastructure spending ought to be increased to about $100bn a year if India wants to grow, reports Nabanita Sircar.

india Updated: Jan 23, 2006 19:19 IST

India needs to spend at least four times more than it does, on infrastructure projects. A leading Indian business executive says the spending ought to be increased to about $100bn a year, if the country is to have a chance of maintaining the pace of its recent economic expansion.

A M Naik, chairman of Larsen & Toubro, a Mumbai-based engineering and construction conglomerate, said: "There is no alternative to improving India's infrastructure if we want to keep the economy growing at 7-8 per cent a year and in particular help the expansion of manufacturing."

Most of the money needs to come from the state and central governments, according to Naik. But he was "encouraged" by the increased willingness of companies - Indian and foreign-owned - to get involved with infrastructure projects. Of the $1,000bn in total investments over 10 years that he thinks is necessary, a quarter would go on improving electricity generation and distribution, is one of the major problems faced by companies in India.

The poor state of roads, ports and public transport, together with other infrastructure failings such as the lack of affordable housing, have been a concern for businesses. Ratan Tata, chairman of Tata, said: "Unless India does something about its infrastructure failings, it will not be able to sustain even its current levels of growth."

United Nations figures show India attracted $5.3bn in foreign investment in 2004, compared to $60.6bn for China, and few expect the figure to pick up significantly in the next few years. Venu Srinivasan, chairman of TVS Motor, a Chennai-based motorcycle maker, said poor infrastructure meant none of India's 10-15 largest cities were "liveable in" by the standards of moderately well off foreigners.

"To make a difference, India needs to bring at least one of its cities to the living standards not necessarily of a European city but a comparable Asian centre such as Jakarta or Kuala Lumpur," he said. "I am not hopeful of this happening in the next few years."

According to report in The Financial Times, many Indian business people despair that India will ever show the resolve necessary to tackle the infrastructure failings.

"A lot of Indian people are too patient and philosophical. I feel sometimes that if we were to give the country to the Japanese or Germans they would make more out of it," said Ashok Jayaram, managing director of the India activities of Rotork, a UK engineering business.

But Lakshmi Mittal, chairman and majority owner of Mittal Steel is more optimistic. Planning to invest up to $9bn in a new steel plant in eastern India, he said: "Infrastructure in India needs to be improved, but it is negative and myopic to believe the problems are a major stumbling block to growth," he said.

First Published: Jan 23, 2006 19:19 IST