Low capital spending hurts India's growth

By agencies   |   Friday, 11 November 2005, 20:30 IST
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MUMBAI: Low spending on infrastructure is holding back India's average growth with the actual amount spent being miniscule compared to the requirement. At present, China spends seven times more on infrastructure (excluding real estate) than India, according to investment bank Morgan Stanley's research on 'India Economics - Infrastructure: Changing Gears.' In 2003, total capital spending on electricity, roads, airports, seaports and telecom was $150 billion in China, which is 10.6 percent of its gross domestic product, compared with $21 billion in India, which was 3.5 percent of GDP. India needs to chalk out a national plan to increase infrastructure spending gradually to $100 billion per annum, about 8 per cent of GDP by 2010, from an estimated $24 billion in 2004, to push the country on to a sustained growth path of 8-9 percent, Morgan Stanley said. The report said the complexity around infrastructure development in India is unlikely to be resolved quickly. The biggest hurdle is the political environment. This is evident from the trend in government capital expenditure, which has witnessed a significant cut since the emergence of coalition government in the mid-1990s. The pulls and pushes of the coalition government inhibit a change in spending mix. Lack of political will to work towards longer payback period oriented infrastructure spending was the overriding generic concern.