India Needs More Private Investment In Infra : Economic Survey
Economic Survey highlights the need for increased private sector investment in sustaining and developing India's infrastructure project
India has experienced a significant infrastructure boom over the last decade, predominantly driven by the public sector. However, to sustain and enhance development, there is a crucial need for increased private investment, according to the Economic Survey released on Monday.
The survey highlighted the transformative changes in India's infrastructure landscape, with consistent advancements in road, rail, air connectivity, sanitation, and digital infrastructure. Yet, the majority of infrastructure creation is led by government agencies, state-owned entities, and banks.
Referring to the Infrastructure Monitor 2023 by Global Infrastructure Hub and the World Bank, the survey revealed that from fiscal years 2019 to 2023, the Union and state governments contributed 49 per cent and 29 per cent of the total investments, respectively, while the private sector's contribution was just 22 per cent.
“For India to continue building quality infrastructure, a higher level of private sector financing and resource mobilisation from new sources will be crucial. Facilitating this would not only require policy and institutional support from the Central Government, but State and Local Governments would have to play an equally important role,” the survey stated.
The government has been attempting to attract private investment in the road sector by modifying the model concession agreement to include private players in highway construction. Despite these efforts, the Railways failed to attract private bids for its ambitious station redevelopment plan, resulting in all projects being undertaken through government-funded EPC (engineering, procurement, and construction) mode.
Drawing on international experiences to facilitate resource mobilisation for infrastructure development, the survey cited innovative approaches such as pooled financing mechanisms for municipal projects, specialised municipal intermediaries, asset recycling programs, tax increment financing, and land sales and development rights.
The survey also stressed the need to enhance data capture and reporting mechanisms for infrastructure investments across instruments and sectors. It pointed out the importance of improving the composition and detailed tracking of different projects.
“The Rangarajan Commission Report on Infrastructure Statistics (2001) underscored the importance of collecting and maintaining a reliable statistical database for the infrastructure sector. Major strides have been made since then to collect data on policy direction, institutional strength, project performance, and monitoring. However, data gaps persist in some key areas,” the survey noted.
Moreover, it highlighted existing databases' shortcomings in assessing infrastructure demand and tracking the utilisation of facilities built in the sub-sectors.
“Demand aggregation can provide insight into the appetite for infrastructure projects based on sub-sectors and regions, while the construction of an index that tracks utilisation rates would shed light on sub-sectors where there is either an oversupply or shortfall of required infrastructure facilities. Addressing these two gaps can provide additional diagnostic measures for enabling policymakers and other stakeholders to optimally allocate scarce resources,” it added.
The creation of resilient, world-class infrastructure—encompassing physical, social, financial, and digital aspects—is central to India's strategy to achieve Developed India (Viksit Bharat) by 2047. This vision aims for a developed and prosperous India by the 100th year of its independence.
