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Indian Infrastructure India to become the second Largest Economy by 2050 Indian Economy The best barometer of country’s

economic standing is measured by its GDP. India, t he second most populated country of more than 1100 million has emerged as one of the fastest growing economies. It is a republic with a federal structure and we ll-developed independent judiciary with political consensus in reforms and stabl e democratic environment .In 2008-09 India’s economy-GDP grew by 6.5% due to globa l recession. In the previous four years,economy grew at 9%.The Indian economy is expected sustain a growth rate of 8% for the next three years upto 2012. With t he expected average annual compounded growth rate of 8.5%, India s GDP is expect ed to be USD 1.4 trillion by 2017 and USD 2.8 trillion by 2027. Service sector c ontribute to 50% of India‘s GDP and the Industry and agriculture sector 25% each. Investment Opportunities In Indian Infrastructure The robust current growth in GDP has exposed the grave inadequacies in the count ry’s infrastructure sectors. The strong population growth in India and its booming economy are generating enormous pressures to modernize and expand India’s infrast ructure. The creation of world class infrastructure would require large investme nts in addressing the deficit in quality and quantity. More than USD 475 bn wort h of investment is to flow into India’s infrastructure by 2012. No country in the world other than India needs and can absorb so many funds for the infrastructure sector. With the above investments India’s infrastructure would be equal to the b est in the world by 2017. In the next five years planned infrastructure investment in India in some key se ctors are (at current prices): Modernization of highways -US$ 75 billion, Develo pment of civil aviation US$ 12 billion, Development of Irrigation system- US$ 18 billion, Development of Ports-US$ 26 billion, Development of Railways- US$ 71 b illion, Development of Telecom- US$ 32 billion, Development of Power -US$232 bil lion. Thus in the eleventh five year plan ,investment in the above sectors (Avia tion infrastructure ,Construction infrastructure, Highway infrastructure ,Power infrastructure, Port infrastructure ,Telecom infrastructure ) will be US$ 384 bi llions(Rs 17,20,000 Crores) considering the huge infrastructure market potential in India. In addition to the above, investments to the tune of US$ 91 billions have been planned in other infrastructure sectors like Tourism infrastructure ,Urban infrastructure ,Rural infrastructure, SEZs ,and water infrastructure and sanitation infrastructure thus making the total infrastructure investments in t he eleventh plan period 2007-08 to 2011-12 as US$475 billions. Domestic and glob al infrastructure funds have exposure to Indian infrastructure sectors. Infrastructure sector targets for Eleventh five year plan ending 2012 Electricity: Additional power generation capacity of about 90,000 MW , reaching electricity to all un-electrified hamlets and providing access to all rural hous eholds through Rajiv Gandhi Grameen VidyutikaranYojna (RGGVY) National Highways: Six-laning 6,500 km of Golden Quadrilateral and selected Nat ional Highways, Four-laning 6,736 km on North-South and East-West Corridors, Fou r-laning 12,109 km of National Highways, Widening 20,000 km of National Highways to two lanes, Developing 1000 km of Expressways, Constructing 8,737 km of roads , including 3,846 km of National Highways, in the North East Rural Roads: Constructing 1, 65,244 km of new rural roads, and renewing and upgr ading existing 1, 92,464 km covering 78,304 rural habitations. Railways: Constructing Dedicated Freight Corridors between Mumbai-Delhi and Ludh iana-Kolkatta, 10,300 km of new railway lines; gauge conversion of over 10,000 k m and doubling, Modernization and redevelopment of 21 railway stations, Introduc tion of private entities in container trains for rapid addition of rolling stock and capacity, Metro rails and world class stations Ports: Capacity addition of 485 million MT in Major Ports, 345 million MT in Min or Ports, construction of jetties and berths, Port connectivity ,channels deepen ing and port equipments.

 

Airports : Modernization and redevelopment of 4 metro and 35 non-metro airports , Constructing 7 Greenfield airports, Constructing 3 airports in North East, Upg rading CNS/ATM facilities ,Establishing training facilities and MRO Telecom and IT : Achieving a telecom subscriber base of 600 million, with 200 mi llion rural telephone connections, Achieving a broadband coverage of 20million a nd 40 million internet connections Irrigation: Developing 16 million hectares through major, medium and minor irri gation works Urban Infrastructure: Urban renewal projects for selected cities; one million pl us cities, state capitals and places of historical, religious or tourist importa nce under Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Rural infrastructure :As per Bharat Nirman action proposed in rural infrastruct ure for irrigation, roads, housing, water supply, electrification and telecommun ication connectivity Construction and Real Estate infrastructure :Development of residential and reta il real estate ,Green buildings ,construction of SEZs, Infrastructure projects, Infrastruture facilities for Common wealth games 2010 Mining Infrastructure :Mineral exploration,Mineral extraction,processing ,techno logy and equipments . Investments in infrastructure sectors to create demand: The estimated infrastructure investments in India over USD475 will create demand for Power equipment , Construction equipment ,Material Handling equipment ,Elec tronic and IT systems ,Environment technologies ,Transport equipment , EPC contr acts, Infrastructure companies in India ,Financial services ,Real estate ,Educat ion and training ,Design and Planning services , Infrastructure consultants , Ad visory and professional services and provide opportunities for investors, contr actors, o&m contractors, developers of infrastructure projects ,foreign players. Infrastructure policy in India: Major policy initiatives such as deregulation, viability gap funding ,India infr astructure finance company, Committee on infrastructure ,rural infrastructure pr ogramme , National urban renewal mission, public private partnerships, Launch of private sector infrastructure funds have been implemented in infrastructure sec tor Road Policy in India: Indian infrastructure policy on roads permit duty free im port of high capacity and modern road construction equipments, complete tax holi day for any 10 consecutive years out of 20 years. Longer concession periods of u p to 30 years are permitted as per the roads policy of India. Airports Policy in India: Indian airport infrastructure policy permits 100% tax exemption for airport projects for 10 years, 100% equity ownership by Non Reside nt Indians (NRIs), 100% foreign direct investments (FDI) in India in existing an d Greenfield airport projects, Airport policy of India also allows 49%FDI and 10 0% NRI investment in airport transport services. Ports Policy in India: As per Indian port policy all areas of port operation ope n for Private Sector Participation .Private sector participation and JVs now per mitted. Ports policy of India also allows 100% income tax exemption for a period of 10 years. Power Policy in India: Indian power policy permit 100 percent FDI (except atomic energy) in electricity generation, transmission, and distribution and trading, Establishing power plants without any license, transmission services for Indepen dent power transmission companies. Oil, Gas and mining Policy: 100% FDI permitted for mining (except coal). CASs, l evied earlier on crude production, has been abolished for the blocks offered und er NELP. In deepwater exploration royalty for areas beyond 400m bathymetry will be charged at half the prevailing rate. In petroleum and natural gas sector 100 FDI is permitted except refining ,subject to sectoral regulations; and in the ca se of actual Trading and marketing of petroleum products, divestment of 26% equi ty in favour of Indian partner/public within 5 years .In refining 100% FDI is al lowed in private companies and 26% FDI allowed in Public sector companies.

Real Estate Policy in India: Corporate tax exemption of up to 100% for industria l parks, SEZs and housing projects are permitted as per Indian Real Estate Polic y. Telecommunication Policy in India: 74% FDI is allowed in Basic and cellular, Uni fied Access Services, National/International Long Distance, V-Sat, Public Mobile Radio Trucked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and Other value added telecom services, ISP with gateways, radio paging, end-toend bandwidth. 100% FDI is permitted in ISP without gateway, infrastructu re provider providing dark fiber, electronic mail and voice mail, subject to the condition that such companies shall divest 26% of their equity in favor of Indi an public in 5 years, if these companies are listed in other parts of the world as per the Indian telecommunication policy. Why India -India at a glance- Attractive Destination India has a population of 1.1 billion. More than 30% of the world’s youth live in India. More than 55% (550 million) of the India’s population is less than 25 years of age. This is nearly twice the total population of the United States. India’s u rban population constitutes around 30%. India is a nation growing younger (popul ation in working age group projected to increase) as the developed world faces t he problem of aging. India has a huge reservoir of English speaking, skilled and relatively inexpensive manpower with over 2.6 million engineers (degree and dip loma holders), 814,000 software professionals, growing every year. It also got a well developed banking system, with over 67,000 branches and banking practices conforming to international best standards with net non performing assets ratio for all commercial banks 1.2%. It has a sophisticated, well regulated capital ma rket with 23 stock exchanges of which the two largest, the National Stock Exchan ge and Bombay Stock Exchange ranked as no 3 and 5 in the globe by number of tran sactions. India has more billionaires than China. This year there were 15 billio naires in China but last year in India, there were 20 billionaires, according to the Forbes magazine. Forty-four per cent of Top 100 Fortune 500 companies are p resent in India. Some of the fortune companies present in India are ABB, Accentu re, Alctel, AMD,ANZ, APC, Bosch, CSC, Citibank, Caterpillar, CA, Delphi, Dell, D upont, Digital , Delloitte ,Ford,HSBC,Hyundai, Google,Intel,GE, Oracle ,Microsof t , Nokia, Siemens. India is the fourth largest economy in terms of purchasing p ower parity, the tenth most industrialized country in the world, the tenth large st economy in the world in terms of GDP and is one of the fastest growing develo ping economies today in the world. The most remarkable feature of its impressive growth story, especially over the last decade and a half, is that it has happen ed in a solid, democratic environment, making the process sustainable. The prese nt infrastructure in India is grossly inadequate for the 1.1 billion populations . To improve the infrastructure of India, large investments have been planned by Indian government. Infrastructure Potential in India: Ports infrastructure in India: India has a long coastline of 7,517 km. The existing 12 major ports control arou nd 76 % of the traffic. Due to globalization, India’s ports need to gear up to han dle growing volumes. A number of the existing ports have plans for expansion of capacities, including addition of container terminals. The government has launch ed the National Maritime Development Programme, to cover 276 port projects (incl uding related infrastructure) at an investment of about INR 600 billion by the y ear 2012. Also, States are increasingly seeking private participation for the de velopment of minor ports, especially on the west ports. Indian ports are projected to handle 875 million tones(MT) of cargo traffic by 2011-12 as compared to 520MT in 2004-05.There will be an increase in container capacity at 17% CAGR.Cargo handling at all the ports is projected to grow at 19 per cent per annum till 2012. Planned capacity addition of 545 mt at major port s and 345 mt at minor ports. Port traffic is estimated to reach 1350 million ton es by 2012 .Containerized cargo is expected to grow at 18 per cent per annum til l 2012. Projected Investment in major ports $16 billions and minor ports $9billi on during 2007-12. Airports infrastructure in India:

Passenger and cargo traffic slated to grow at over 20% annually and set to cross 100 million passengers per annum by 2010 and and set to cross cargo traffic of 3.3 million tonnes by 2010.Mumbai and Delhi airports have already been handed ov er to private players.Kolkata and Chennai airports will also be developed throug h JV route. Railways Infrastructure in India: Indian Railways is the largest rail network in Asia and worlds second largest un der one management. Indian Railways comprise over one hundred thousand track kil ometers and run about 11000 trains every day carrying about 13 million passenger s and 1.25 million tones of freight every day. The scope for public private part nership is enormous in railways, ranging from commercial exploitation of rail sp ace to private investments in railway infrastructure and rolling stocks. The Go lden quadrilateral is proposed to be strengthened to enable running of more long distance passenger trains and freight trains at a higher speed. Programmed also envisages strengthening of rail connectivity to ports and development of multim odal corridors to hinterland. Construction of 4 mega bridges costing about US$ 7 50 million is also included in the programme.Construction of a new Railway Line to Kashmir valley in most difficult terrain at a cost of US$ 1.5 Billion and exp ansion of rail network in Mumbai area at a cost of US$900 million has also been taken up. Freight traffic is growing at close to 10% and passenger traffic at cl ose to 8% annually. Railways have planned a dedicated rail freight corridor runn ing along the railways Golden Quadrilateral (GQ). The double-line freight corrid or is expected to evolve systematic and efficient freight movement mechanisms an d ease congestion along the existing GQ. It would leave the existing GQ free for passenger trains. The 9260 km dedicated freight corridor to be built at a cost of Rs 60,000 crore (US$ 15 billion) is being funded partially with a US$ 5 billi on loan from Japan. The work is expected to be completed within the next 5–7 years . The first phase of the project would include the Delhi–Howrah and the Delhi–Mumbai routes. Power Infrastructure in India: Presently the installed capacity of electric power generation stations under uti lities stood at 130000MW and in the five year plan the generation capacity is pl anned to be increased to 2,20,000 MW by 2012.There is a 13% peaking and 8% avera ge shortage of power annually. Central government has already taken steps to in crease capacity by building Ultra mega power projects (UMPPs).There is a plan to increase Nuclear power capacity from 3900MW currently to 10000 MW by end of 11t h plan. Telecom Infrastructure in India: Even with the rapid growth of telecom sector in India, the rural penetration is still less than 5%. At 500 minutes a month, India has the highest monthly minut es of usage (MOU) per subscriber in the Asia-Pacific region, the fastest growth in the number of subscribers at CAGR of more than 50%, the fastest sale of a mi llion mobile phones (in one week), the world s cheapest mobile handset and the world s most affordable colour phone. Highways and Roads infrastructure: The Indian road network has emerged as the second largest road network in the wo rld with a total network of 3.3 million km comprising national highways (65,569 km.), State highways (128,000 km.) and a wide network of district and rural road s. The US tops the list with a road network of 6.4 million km. Currently, China has a road network of over 1.8 million km only. Out of the 3.38 million Kms of I ndian road network, only 47% of the roads are paved. Roads occupy a crucial posi tion in the transportation matrix of India as they carry nearly 65 per cent of f reight and 85 per cent of passenger traffic. Over the past decade several major projects for development of highways linking the major cities have been planned – and work started on most of them. What is of significance is that private sector involvement (BOT projects) has finally been found to be feasible in the Indian context. This has led to an accelerated growth in this sector – which had long bee n faced with financial constraints. This has also facilitated improvement in the quality of the new highways and introduction of the latest concepts for toll co

 

 

 

 

llection, signages etc. The process of development of the new highways is expect ed to continue for many years to come. Construction Infrastructure in India: Construction accounts for nearly 7 per cent of Indian GDP and is the second bigg est contributor (to GDP) after agriculture. Construction is a capital-intensive activity. Broadly the services of the sector can be classified into infrastructu re development (54%), industrial activities (36%), residential activities (5%) a nd commercial activities (5%). The main entities in the construction sector are construction contractors, equipment suppliers, material suppliers and solution p roviders. India’s construction equipment sector is growing at a scorching pace of over 30 per cent annually--driven by huge investments by both the Government and the private sector in infrastructure development. It is estimated that there i s USD860 billion worth of construction opportunities in India Oil, Gas –Hydrocarbon Infrastructure in India With the exponential increase in the population of vehicles and industrial requi rement, the consumption of petrol products is likely to increase to 300 MMT by t he year 2010. India has established geological reserves of more than 6 billion a nd exploration acreages are available on offer on continuous basis. It is estima ted that investment over the next 10-15 years shall be in the range of US$ 100-1 50 billion. Additional refining capacity of 110 million tonnes shall be required by 2010. Opportunities have emerged in business areas linked to Natural Gas. Pr ivate opportunities also exist in infrastructure like jetties, storage tanks, mo vement of oil and petro-products. Oil import constitute largest share of total i mport and therefore Government has taken many initiatives to mitigate the situat ion and attract the foreign investors.100% foreign investment has been allowed i n this sector. Deregulation and de-licensing has been done for the petroleum pro ducts. Rationalization of pricing has taken place by decontrol and import parity . Private sector can import most products, pipelines, terminals and tank ages cl eared for private investment. JV can be formed for the development of infrastruc ture, marketing and, refining activities. NEW INSTITUTIONAL MECHANISM FOR PPP The creation of world class infrastructure would require large investments in ad dressing the deficit in quality and quantity. , it is necessary to explore the s cope for plugging this deficit through Public Private Partnerships (PPPs) in all areas of infrastructure like roads, ports, energy, etc. Given the risks involve d in large projects the government has realized that only public sector involvem ent with central government development assistance for infrastructure projects i s not adequate to meet the challenge. Recognizing the imponderable risks, which infrastructure projects entail, with long gestation periods, high costs and budg et constraints, the government has proposed a flexible funding scheme, which wil l find support from budgetary allocation to fund public-private-partnerships (PP Ps) for infrastructure projects. The government has proposed India Infrastructur e Finance Company (IIFC) and formulated a scheme to support PPPs in infrastructu re. As part of this scheme, PPP opportunities are to be awarded through competit ive bidding in a transparent manner and for each project, performance is to be a ssessed against easily measurable standards, based on unambiguously defined crit eria, in order to inspire confidence among investors. Recently, legal and regulatory changes have been made to enable PPPs in the infr astructure sector, across power, transport, and urban infrastructure. For exampl e, the Electricity Act allowed for private sector participation in the Distribut ion of electricity in specified area(s) of the distribution licensees under the role of a “franchisee”. The recognition of the franchisee role is a significant step towards fostering PPP in the distribution of electricity. In some cases, the im pact of private sector involvement in terms of end-user benefits has been felt a lmost immediately. A case in point is the initial Build-Operate-Transfer (BOT) e xperience at Jawaharlal Nehru Port, where the Minimum Guaranteed Traffic require ment at the end of 15 years, identified as part of the concession agreement, was met in just 2 years. The experiment is being replicated across other major port s as well. Special Economic Zone (SEZ) – A New Policy

The Government of India has announced a pragmatic “SEZ” policy, which offers several innovative fiscal and regulatory incentives to developers of the SEZs, as well as the units within these zones. Each SEZ is treated as a foreign territory and units located in it are not subject to either customs tariffs or domestic duties . Sales to Domestic Tariff Areas are permitted, subject to payment of applicable customs duties and import policies in force. Inputs, whether imported or source d domestically, are free of any taxes. So are exports made from a SEZ. The only requirement is that the SEZ and the units located within it are positive foreign exchange earners. This offers foreign companies tremendous opportunities for ta king full advantage of Indian strengths in doing business in India. This could b e either as the developer of the SEZ or as a unit in a SEZ or both. Presently, t he board of approvals for the SEZs granted formal approvals for 340 SEZs. These 339 SEZs today have lands for development. It is widely expected that the Specia l Economic Zones approved for various parts of the country, once implemented, wo uld contribute substantially to India s exports and would help connecting the mi ssing links in manufacturing. These zones aim at providing an internationally co mpetitive and hassle free business environment for promotion of exports.