Occasional PapersPublished on Feb 10, 2014 PDF Download
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Infrastructure Challenges in India: The Role of Public-Private Partnerships

The lack of proper infrastructure pulls down India's GDP growth by 1-2 per cent every year. This Paper gives an overall perspective on the infrastructure challenges facing the country. It argues that public investment will have to be supplemented by private sector investments, in PPPs, to boost the physical infrastructure sector in the country.

While India is the fourth largest economy in the world, a key Wfactor obstructing its growth and development is the lack of world class infrastructure. Estimates suggest that this lack of adequate infrastructure reduces India’s GDP growth by 1-2 per cent every year. Fast growth of the Indian economy in recent years has placed increasing stress on physical infrastructure, such as electricity, railways, roads, ports, airports, irrigation, water supply, and sanitation systems, all of which already suffer from a substantial deficit.

Physical infrastructure has a direct impact on the growth and overall development of an economy. The goals of inclusive growth and 9 per cent growth in GDP can be achieved only if India’s infrastructure deficit is overcome. Infrastructure development will also help create a better investment climate in India. To develop infrastructure in the country, the government is expected to review issues of budgetary allocation, tariff policy, fiscal incentives, private sector participation, and public-private partnerships (PPPs).

There are many issues that need to be addressed in different infrastructural fields. To begin with, the gap between electricity production and demand is affecting both manufacturing and overall growth. Another concern is the transport sector; while road transport is the backbone of the Indian transport infrastructure, it is inadequate in terms of quality, quantity, and connectivity. Furthermore, civil aviation and ports desperately need modernisation. It is expected that the public sector will continue to play an important role in building transport infrastructure. However, the resources needed are much larger than what the public sector can provide.

This paper is organised as follows. Section 1.1 gives a brief description of Infrastructure Development in the Twelfth Five Year Plan. Section 1.2 explains in detail a few important sources of infrastructure financing in the country. Section 2 elucidates public-private partnerships in India and is followed by a case study of Cochin International Airport in Section 2.1. Section 2.2 presents the approach to PPPs in India. The major challenges and impediments to infrastructure development in the country are presented in Section 3 and Section 4 provides concluding remarks.

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