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India Planning $11 Billion Infrastructure Fund, Ah

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India Planning $11 Billion Infrastructure Fund, Ahluwalia Says

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By Unni Krishnan and Santosh Kumar

May 14 (Bloomberg) -- India is planning to set up a 500 billion rupee ($11 billion) infrastructure debt fund as it seeks to address a power shortage and upgrade its roads and ports, Montek Singh Ahluwalia, a top government adviser said.
“The modalities are being worked out,” he said in a telephone interview from New Delhi. “The idea is to refinance lending institutions. We are talking to the World Bank and other multilateral agencies.”
India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of its infrastructure, spent 6.5 percent of its gross domestic product in 2009 on infrastructure, compared with about 11 percent by China, according to an Ernst & Young India report. Failure to lift investment may imperil Prime MinisterManmohan Singh’s target of boosting economic growth to 10 percent needed to pull 828 million people living on less than $2 per day out of poverty.
The fund is a “good start but it won’t be enough,” said Prasanna Ananthasubramaniam, chief economist at ICICI Securities Primary Dealership Ltd. in Mumbai. “One fund cannot take all the risks of infrastructure projects.”
Ahluwalia, deputy chairman of the nation’s Planning Commission, said in a report in March that India may need as much as $1 trillion in investment between 2012 and 2017.
The proposed fund will sell bonds and lend to projects, he said yesterday. India is ranked 89 out of 133 nations for its infrastructure, according to the World Economic Forum’s Global Competitiveness Index.
Largest Cities
India’s per capita spending on city development is $17 each year, just 15 percent of what China spends, according to a report released by McKinsey & Co. last month. India will have 68 cities with a population of more than one million people, 13 cities with more than four million people and 6 mega cities with populations of 10 million or more, at least two of which will be among the five largest cities in the world by 2030.
India produces about 10 percent less electricity than it needs. The roads, which account for 65 percent of India’s cargo, are plagued by single lanes and irregular surfaces, slowing trucks to an average speed of about 20 kilometers per hour, said a 2009 study by Transport Corp. of India and the Indian Institute of Management, Calcutta.
The average time taken by ships to unload and load at Indian ports is almost 96 hours, about 10 times longer than in Hong Kong, the government said in its latest annual economic survey.
To contact the reporters on this story: Unni Krishnan in New Delhi [e-mail]; Santosh Kumar in New Delhi [e-mail]