Infrastructure investment target set to drop by 20 pc

The $1 trillion figure was set as the target for the 12th five-year plan period

Indias ambitious target to invest $1 trillion to boost its infrastructure over the next five years is expected to be cut by at least 20 per cent,a move forced by slowing economic growth and a failure to meet investment targets in the sector by a similar 20 per cent in the last five years.

The $1 trillion figure was set as the target for the 12th five-year plan period of 2012-13 to 2017-18. It is to be used for everything from building roads,bridges and airports to overcoming chronic power shortages. But government officials tasked with drawing up the five-year plans said the

target is unlikely to be realised.

The new number is expected to be at least 20 per cent lower at about $800 billion as investments,especially in sectors such as oil and gas,urban infrastructure and ports and telecom are expected to be far lower than earlier projections. The lower projections will also force banks and others to make corrections in the loans they can provide for the sector in the next few years.

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The other reason for the revision is that the 11th plan has itself fallen short of the anticipated infrastructure investment. Instead of the $500 billion that was expected,the plan is likely to end with $100 billion less,although this was the most buoyant phase of growth of the Indian economy.

The revised estimate will be part of the final 12th plan document to be reported to the meeting of the National Development Council in September. The council membership includes all chief ministers and the union cabinet and is the final authority for the adoption of each five-year plan.

While even at $800 billion (about Rs 40,00,000 crore) the pace of investment is seen as sizable,officials said that there was an element of excitement associated with the figure of $1 trillion as a benchmark.

The change is another of the painful adjustments the Indian government is being forced to make about the pace at which the economy will move. Recently,Planning Commission deputy chairman Montek Singh Ahluwalia conceded that an annual GDP growth rate of close to 8.5 per cent will be difficult to achieve during the 12th plan.

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Vinayak Chatterjee,CEO of Feedback Ventures,an infrastructure firm and a close observer of the sector,said that the revision would be a sobering call for the planning commission and for policy-makers about the chances of a further slippage in the economy.

In the current phase of slowdown with a sharp decrease in capital investment,not only are the projections for 2012-13 far worse,but the expectations for 2013-14 are lower too. The IMF has projected that the Indian economy will recover next year but still grow only at 7.3 per cent.

Chatterjee,however,said that the lower projections did not necessarily reflect a corresponding large cutback. In rupee terms the numbers still hold. The conversion into dollars of course in the current phase of sharp depreciation makes the estimate look bleak.