India’s infrastructure deficit
requires massive financing. The country needs to spend Rs 50 lakh crore by 2022 to provide a strong foundation for rapid growth, estimates CRISIL. Three sectors — power, transport
— are likely to account for roughly three-fourths of this overall spend, as shown in Chart 1.
But these sectors vary in terms of their attractiveness. As Chart 2 shows, power
transmission, renewables, and highways rank higher on CRISIL’s investment index, while thermal generation, railways, and urban
infrastructure rank lower.
A sector-wise analysis shows that transmission capacity in the country has grown at a healthy pace of 9.1 per cent compound annual growth rate (CAGR) between FY15 and FY17 (Chart 3). Also, renewables seem to be doing well. As shown in Chart 4, an improvement in the transmission infrastructure, lower capital-cost and a sharp decline in module prices has led to the grid-connected renewable energy capacity growing at 27 per cent CAGR a year between FY15 and FY17.
On the other hand, the Railways
has announced a massive Rs 8.56-lakh-crore investment outlay over FY16 to FY20 (Chart 5), but progress on several parameters has been slow, as shown in Chart 6. On aviation, with major airports operating near peak capacity (Chart 7), massive investment is required to fulfil the infrastructure deficit.
In the roads sector (Chart 8), as opposed to a budgetary allocation of Rs 64,000 crore in FY18, CRISIL estimates a staggering Rs 10 lakh crore is needed. In urban
infrastructure too, while India’s municipal revenue base adds up to only 1 per cent of GDP, CRISIL estimates an ‘adequate municipal revenue base’ at 5 per cent of GDP (Chart 9).