The Hindu Business Line : ‘India needs to do more to lure investments in infrastructure’

New Delhi, Nov 5 With countries such as Australia, Brazil, China, Russia and the US lining up infrastructure projects where they would invite private investment, India needs to take steps to make its infrastructure market more attractive to the investors, said consulting firm Ernst & Young.

However, it said that currently, India is believed to be a good investment destination, among the US and European Union investors, despite political uncertainty, bureaucratic hassles, shortages of power and infrastructural deficiencies.

“India will have to compete with other developing as well as developed countries for getting private funding in infrastructure,” Ernst & Young’s Partner (Transaction Advisory Services), said Mr Kuljit Singh, while launching a report on ‘Investing in Global Infrastructure 2007’.

STEPS REQUIRED

According to Mr Jayesh Desai, Director, Ernst & Young (Transaction Advisory Services), “To attract private investors, the Indian Government could take several steps like easing norms for foreign capital by removing external commercial borrowing restrictions, providing fiscal incentives and allowing pension funds to invest in the sector.” Additionally, the Indian Government needs to ensure that there is a steady flow of infrastructure projects at any given point in time.

There is a need to focus on State Government-driven infrastructure projects. India has witnessed over 172 infrastructure projects in the last 15 years with private sector participation and a total investment close to $51 billion. Increasingly private investments have started playing a significant role in the development of the infrastructure segment and meet India’s challenge to improve the existing infrastructure.

INVESTORS IN INDIA

India’s continuing need for private capital has opened up more opportunities for foreign investment in infrastructure. Global investors in India’s infrastructure market are mainly private equity funds and other investors from the US and European Union, whereas, the market’s developers and contractors are mainly from Asia, Australia and EU. Foreign investors are comfortable with the idea of investing in Indian infrastructure as the risk returns ratio is comparable with that of most other developing markets, it says.

The report points out that the average internal rate of return (IRR) on infrastructure projects in India is about 14-20 per cent. India represents vast potential for overseas investment and is encouraging the entrance of foreign players into the infrastructure market to provide much of the capital, creating more opportunities for international investors to join hands with Indian partners in making direct investments in infrastructure in India or creating infrastructure funds.

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