India : Perspective On Infrastructure Investments Vinayak Chatterjee Tokyo May, 2007 by

Slide 2 “Many of my ministerial colleagues must have spoken to you about the challenges posed by the so called 'infrastructure deficit'. This area, apart from agriculture, is the one, which has been gaining our attention most. We have set up a Special Purpose Vehicle for raising dedicated long-term funds for financing infrastructure. We have moved away from a government- centered approach to a public-private partnership approach… Indian Prime Minister, Dr. Manmohan Singh on Infrastructure [From the speech at the India Economic Summit, 2005]

Slide 3 …We have developed transparent, competitive procedures for such partnerships, which would function on commercial lines. We have established a viability gap funding mechanism for making these projects commercially viable. I am certain that we are now at the take-off point in infrastructure.” Indian Prime Minister, Dr. Manmohan Singh on Infrastructure (Contd..) [From the speech at the India Economic Summit, 2005]

Slide 4 Approach Paper to the 11 th Five Year Plan provides a ‘vision’ for the period to On 18th October’06, Chairing a meeting of the Planning Commission, the Prime Minister set a target of 9% average economic growth for the 11th Plan. Vision For Next 5 Years ( )

Slide 5 The Planning Commission suggests that “investments will need to increase from 4.6% of GDP to between 7% and 8% in the 11th Plan period”. This would entail an outlay of US$ 350 Billion across the 11th Plan Period ( ). Gross Capital Formation in Infrastructure (GCFI)

Investments Required in Infra in Next 5 Years : A Scenario GCFI Required GCFI** Required as % of GDP GDP* 9% p.a. 5% Last Year NEXT 5 YEARS(11 TH PLAN) %7% 6.5%5.5% Total : 5 Years * GDP (Market Prices) was Rs.3231,000 Crores = US$ 718 Billion ** GCFI = Gross Capital Formation in Infrastructure (US$ Billion) 5.5% This Year Slide 6

Slide 7 Japanese Yen 40,000 Billion is thus the size of the investment opportunity for next 5 years in Indian infrastructure. Size of the Opportunity

Slide 8 World Bank sources tell us that in the 1990s: 70% of infrastructure investment in developing countries came from governments or public utilities 22% came from the private sector 8% from official development assistance General Pattern of Funding

70%245From Public Expenditure 10%35 From World Bank, ADB, JBIC and other multilateral/bilateral agencies 20%70 From Private Capital (Domestic and FDI) 100%350 Resources to be organized for infra investments in 11 th Plan Period %Amount Perspective on Indian Infra Funding Sources (US$ Billion) Slide 9

Sectoral Requirement of Funds 34120Energy Amount% Sector 78Envisaged 22Others* 100Total 3Ports 3Airports 5Irrigation 14Nat Highways 19Railways * Telecom, Tourism, SEZs & Townships, Supporting Urban Infrastructure, Water & Sanitation, State & Rural Roads, Logistics etc. (US$ Billion) PPP Possibilities Slide 10

Slide 11 Key Imperative ONE : Private Sector PPP initiatives leading to a large pool of bankable projects. Establishment of really “independent” Economic Regulators.

Slide 12 Key Imperatives TWO : Overseas Development Assistance (ODA) Engage aggressively with multilateral agencies like World Bank Asian Development Bank and Japan Bank for International Cooperation to secure commitments totaling not less than US$ 39 Billion for the 11th Plan period.

Slide 13 Key Imperatives THREE : Public Expenditure Structure large-scale projects (like Rail Freight Corridor, NHDP and Bharat Nirman) involving substantive public expenditure Implement fresh ‘out-of-the- box’ initiatives to raise savings and resources for this purpose to a level of US$ 234 Billion.

Slide 14 Key Imperatives Four : Long Term Financing Create vibrant equity and long- term debt markets for infrastructure financing. Consider innovative means to use forex reserves.

Slide 15 Project pipe-line creation Inter-sectoral co-ordination Project implementation monitoring GCFI as key performance indicator Creation of ‘independent economic regulators’ PPP policies and dedicated PPP cells Long-term debt markets Political will and public mind-set to implement user-pay charges Moving Forward

Slide 16 “There is enough private capital jostling around the world. We will have to change our thinking to tap these resources. …………We will have to think out of the box. We will have to accept that we are part of the global economy. ……….” Mr. P. Chidabaram, Finance Minister [Speaking at the Infrastructure Seminar, Vigyan Bhawan, New Delhi, 7 th October’06]

Slide 17 The Indian Infrastructure Sector welcomes participation across all areas by Japanese companies: Advisory Engineering Project Management Project Development Construction Financing Operations & Maintenance Welcome !