This article focuses on the current scenario of FDI in Indian infrastructure and how India has a long way to go in order to attract FDI for this sector, as the present scenario is not so encouraging. India needs to regulate the policies and create an environment to attract FDI so that long-term commitments may be delivered to the infrastructure sector in the future.
Due
to India's high population growth, building world-class infrastructure
is more relevant in India than in countries with saturated
economies like the West. Aiming for world-class infrastructure
in India provides Indian construction companies with an opportunity
to learn about the best practices and standards and build
references so that they can compete for similar projects globally.
This is the path that China is adopting. The infrastructure
(6-tier flyovers, world's fastest train connection between
Pudong Airport and Shanghai City, Massive Power Plants, Telecom,
etc., to site a few examples) was primarily built with
western technology but Chinese joint venture companies who
have absorbed the technology are now able to duplicate
the same elsewhere. In the context of India, the major challenge
is attracting investment in infrastructure and providing a
confidence to the investors with regard to the future revenue
potential. So far, majority of the infrastructure investments
are coming in the form of loans and government funding, while
there is an urgent need to encourage Foreign Direct Investment
(FDI) in the infrastructure sector.
We
are competing for investments globally, with Singapore, the
Middle-East and several locations in China which have set
an example much beyond scope by using a large measure of FDI
and public finances which Public Private Partnership (PPP)
cannot sustain. In 2005, China spent 11% ($150 bn) of GDP
in infrastructure development while India spent only 5-6%
($21 bn) in this activity. On the other hand, China is also
able to attract a huge FDI for development while India's attractiveness
of FDI is not encouraging. |
