Infrastructure Investment Gap

India will face a $526 billion infrastructure investment gap by 2040 as there are 1,263 projects in progress across sectors such as power, road, railways, shipping and telecom, according to the latest Economic Survey
What did Survey Say?
  • Around US$4.5 trillion worth of investments is required by India till 2040 to develop infrastructure to improve economic growth and community well-being. The current trend shows India can meet around US$3.9 trillion infrastructure investment out of US$4.5 trillion
  • The main reasons behind the infrastructure investment shortfall, it said, were the collapse of public private partnerships (PPP), stressed balance sheets of private companies and problems with land and forest clearances.
  • The Survey said the gap needs to be filled by private investments and the National Infrastructure Investment Bank (NIIB), along with support from global institutions such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank.
  • The Survey also called for encouraging ship-building and manufacturing, given India’s strategic location along international trade routes.
Logistics Sector
  • The Survey pitched for was India’s $160 billion logistics sector, which, it said, needs to be improved because of its impact on improving competitiveness in the wider economy. India has been grappling with high logistics costs of 16-18% (of the cost of a product), which make exports uncompetitive when compared with those of China, where these costs make up 8-10%.
  • Improving logistics sector has huge implication on exports and it is estimated that a 10% decrease in indirect logistics cost can increase 5-8% of exports.
  • With the implementation of goods and services tax (GST), the Indian logistics market is expected to reach about US$ 215 billion in 2020, growing at a CAGR (compound annual growth rate) of 10.5%.
Way Forward
Innovative financial solutions are the need of the hour. So India would need to find innovative mechanisms to attract investments into infrastructure to sustain its growth

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