Montek: can’t compare with China on infrastructure investment

Even though the Government wants to convert the current “stream” of investments...

Even though the Government wants to convert the current “stream” of investments coming into infrastructure sectors into a “flood”, it is not in a position to follow the Chinese model where projects are being set up on an enormous and massive scale much before their need arises.

Speaking at the India Economic Summit on Tuesday, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the scale at which projects are being planned and executed in China are “not comparable” and that the strategy being adopted in China is to “build ahead of (the) need”.

Be it the savings to GDP ratio or the percentage of GDP that gets converted into investments, the Deputy Chairman indicated that the Chinese model is just “not comparable” to what India needs to do.

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In terms of scale, it needs to be pointed out that while India was able to set up around 5,000 km of four-laned highways in five years, China was able to set up over 40,000 km of expressways. Similarly, while India was barely able to add 20,000 mw of power capacity in the Xth Plan, China was able to set up 100,000 mw of power capacity in one year alone.

Ahluwalia also said that the Chinese savings rate was at 55 per cent of GDP and the investment rate was at 45 per cent of GDP. While this high rate of investment is reflected in China’s massive expansion of infrastructure sectors, Ahluwalia said we “don’t need” such high investment rates.

In fact, speaking to The Indian Express later, Ahluwalia said if India targets to raise the investment rate from around 36 per cent to 38 per cent “that will be very good”.

Outlining the extent of funds needed for the infrastructure sector, Ahluwalia said the funding requirement for the next five years works out to be around $ 500 billion of which 30 per cent would have to come from the private sector. In percentage terms, he said this would amount to increasing the spending on infrastructure from the current 5 per cent of GDP to about 9 per cent of GDP by year 2011-12.