India should look at infrastructure to lead the economy rather than just supporting the economic growth, says Amrit Pandurangi , Leader Infrastructure Practice, PricewaterhouseCoopers, in the course of a recent pre-Budget interaction with Business Line , over the email.
Excerpts from the interview
What are the vital things that the Budget should address as far as infrastructure is concerned?
At the beginning of the current 5-Year Plan, the Government targeted a very substantial increase in infrastructure investments during the Plan. $500 billion was the Plan target with a substantial share going to the power and road sectors. The Government targeted 9 per cent of GDP for infrastructure investment by the end of 5-Year Plan (2012) from about 4 per cent of GDP at the beginning of the Plan period.
It is heartening to note that despite the world economic crisis and the consequent difficulties of financing major infrastructure investments, we are likely to achieve the 2012 target of 9 per cent of GDP. It is reported that we are likely to be achieving close to 8 per cent in the current year itself and thus not miss the end of Plan target.
However, what is extremely important is to sustain the infrastructure investments. The present Budget, therefore, should aim at doing everything right for sustaining investments into roads, power, ports, urban infrastructure, etc. on a year-on-year basis.
This will not only help economy in the long run but will also result in addressing the more immediate issues of quicker economic recovery and employment creation. India should clearly look at infrastructure to lead the economy rather than just supporting the economic growth.
What do you consider can be the desirable policy changes for the infrastructure sector?
There has been a lot of debate about significant policy changes to liberalise the economy across all sectors. We are lucky to see that the policies in the infrastructure have always been a little ahead of the curve as far as liberalisation is concerned.
Whether we are talking about the FDI policy or the policy of private investment into infrastructure or indeed the several policies of going more open and global in the infrastructure sectors, one can complement the government on the good and progressive policies that we have seen.
While one can argue that there is further improvement and further liberalisation that is required in some of these policies, I think we have done quite well and can continue to evolve our policies towards more liberalisation in a gradual manner.
What is, however, required is consistency and stability of the policies, so that infrastructure investors – be they Indian or overseas – come in a bigger way, for the longer term and offer better value to the users.
Financial investors into infrastructure, such as the infrastructure funds, insurance companies and PE (private equity), can be attracted in a much more targeted and focused manner by having more consistent and stable infrastructure policies.
The Budget can do its bit towards this by ensuring that at least the fiscal concessions provided to infrastructure sectors and allocations made towards these sectors are more definitive, more consistent and indicative of a longer term stable regime.
Another important policy that the Budget can initiate the discussion on, and give an indicative incentivisation position, is the issue of sustainability of infrastructure investments. Heavy capital investments made need equally significant and assured financial allocations for maintenance of assets created.
With the entire country’s focus being clearly on creation of new assets across infrastructure sectors, it is important to realise that there is no point having large allocations without corresponding allocations for maintaining the asset base created.
This is applicable even for PPP projects where the maintenance expenses have to be incurred by the private operator but he needs assured cash flows from the business (in quite a few cases the assured income comes from budgetary allocations towards annuity payments).
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