Insight on Investment - FDI in
Foreign Direct Investment (FDI) has been recognized as one of the
important drivers of the economic growth of India.
Through our interviews with the multinationals' senior managers showed
that they rank India's infrastructure as the country's most serious
flaw. India has poor roads and insufficient water and electricity
supplies, all of which could thwart its development. China trumps India
when it comes to industries that rely on "hard" infrastructure (roads,
ports, power) and will do so for the foreseeable future.
However, the government is trying to improve India's infrastructure as
The government is focusing on expansion and modernization of roads and
has opened up the sector for private sector participation. 18000 km of
highway are being developed under National Highway Development program.
Projects for 10000 km would be on offer with an estimated investment of
USD 20 billion. A number of foreign companies are working on these
projects, in collaboration with Indian companies.
There is large potential for investment in the expansion and
modernization of ports. The government has taken up a USD 22 billion
Sagarmala project to develop the port and shipping sector as a
public-private partnership initiative. Twelve private/ captive projects
with an investment of USD 60 million completed. 100 percent FDI is
permitted for construction and maintenance of ports. The government is
also offering incentives on investments in this sector.
Upgradation and modernization of airports is estimated to require an
investment of USD 33 billion in the next 10 years.
Upgradation of coaches, tracks, and communications and safety equipment
in the Indian railway sector is estimated to require an investment of
USD 22 billion in the next 10 years.
There is potential for investment in urban infrastructure projects.
Water supply and sanitation projects are expected to offer scope for an
annual investment of around USD 5 billion
The ministry of power has formulated a blueprint to provide reliable,
affordable and quality power to all users by 2012. This is estimated to
require an investment of USD 120 billion. Additional capacity required
till 2012 is 100,000 mega watt. There are good opportunities for
investment in power generation, power distribution and in development
of non-conventional energy sources. The last union budget has made
significant changes in policy to promote private sector participation
in coal mining. As many as 56 power projects with a capacity of 28500
mega watt are currently under various stages of implementation.
The telecom market is amongst the worlds’ largest and fastest growing
and is expected to have an investment potential of USD 20-25
billion in the next five years. The size of the Indian telecom market
is expected to increase to USD 13 billion by 2007. If that happens,
this market would have annually grown at a compounded rate of around 11
percent since 2003 (USD 8.6 billion). Current market share of private
sector stands at 46 percent. Mobile phone users are rising by 2 million
a month and are expected to touch 200 million by 2008. Broadband
subscribers are expected to go up to 20 million by 2010.