Kolkata: Reviving private Investments cited that anestimated investment of USD 2.2 trillion (tn) into infrastructuredevelopment is imperative to support India’s GDP size to expand to USD7 tn by 2030, according to a Knight Frank, India’s leading real estateconsultancy, latest report on India Infrastructure.
To achieve an economic size of USD 7tn by 2030, India’s economy isrequired to grow at a CAGR of 10.1 percent between 2024-2030.The central and state governments’ heavy reliance on infrastructureinvestments could strain fiscal deficit targets. Private participationin infrastructure development in India has decreased significantly,from USD 160 bn (46.4 pc of total investments) between 2009-13 to USD39.2 bn (7.2 pc) between 2019-23, the report said here on Thursday.
This shift has led to a larger share of government-led investments,potentially widening the fiscal deficit. Maintaining a controlledfiscal deficit is crucial for long-term economic stability andeffective debt management.
The central government aims to reduce its gross fiscal deficit tobelow 4.5 pc by 2025. Increasing private sector participation ininfrastructure development would help balance fiscal deficit targets.
By increasing the private participation in infrastructure development,the government can redirect the expenditure towards other key segmentsof economic growth such as – public healthcare, strengthening humancapital, debt payments, etc which will support long term growth of theeconomy, the report maintained.
At an existing investment share composition of Centre (51.2 pc), State(44.1 pc), Private (4.7 pc), the estimated gross fiscal deficit in2030 will still be 4.7 pc, which is above the government’s definedfiscal deficit threshold. The private participation in infrastructuredevelopment in India amounts to USD 103.2 bn until 2030. However, theshare of private investment in this composition is negligible andneeds to expand.
A 10 pc top up in private investments in infrastructure to 14.7 pcbrings the potential opportunity amount to USD 324 bn, an annualaverage of USD 54 bn until 2030. This will potentially support thegovernment to maintain healthy fiscal balances. While this volume mayseem formidable, similar large-scale investments are already beingundertaken in peer economies. It is still lesser than an annualaverage of private investments received by China prior to the COVID-19pandemic, wherein the annual average of private investments ininfrastructure projects amounted to USD 118 bn.
“Strong impetus on infrastructural development and increasedbudgetary allocation by the government has led to India’s ranking inthe Logistics Performance Index (LPI) improving from 54 in 2014 to 38in 2023. In the last few years, there has been an aggressive push bythe policy makers to significantly expand India’s infrastructure. Thiswidens the scope for private players to actively participate inIndia’s infrastructure development and economic growth. However, thereare certain bottlenecks limiting this scope. Hence, radical measuresare required to induce a higher allocation of private investmentstowards infrastructure development to balance fiscal prudence to thegovernment’s budget and bring inclusive and long term sustainableeconomic growth in the country,’ Shishir Baijal, chairman and MD,Knight Frank India said
