India is banking on private equity inflows and an annual use of $5 billion from its foreign exchange reserves to meet the investment needs of its creaky infrastructure, the finance minister said on Saturday.
Palaniappan Chidambaram told a conference of senior government officials that India will require $475 billion investment in infrastructure during 2007/12, higher than a previous estimate of $320 billion.
India is building more roads, ports, airports, railway tracks, power plants, residential and office complexes to sustain an average annual growth of 9 percent in the next five years from an average 8.6 percent in the past four years. It grew 9.4 percent in 2006/07.
The government alone will not be able to meet the growing funding need for infrastructure and the country will need massive private investment, Chidambaram said. "Private investment need is $18-20 billion a year," he said, adding global private equity funds are keen to invest in India's infrastructure projects.
In February, four financial institutions - Citigroup, Blackstone, Infrastructure Development Finance Company Ltd and India Infrastructure Finance Company (IIFCL) - launched a $5 billion infrastructure fund. In April, another private equity firm 3i tied up with IIFCL. "Similar other initiatives are waiting to be launched in India," Chidambaram said.
The Finance Ministry was discussing with the central bank ways of using part of foreign exchange reserves, estimated at $218.96 billion as at July 6, for funding infrastructure projects, he said. "This will make available another $5 billion a year for infrastructure," he said. The minister urged states to come up with bankable projects so that it could be funded by private players.