Last Wednesday, Indian Prime Minister Manmohan Singh addressed a committee of national ministers and secretaries to discuss an enormous infrastructure plan designed to speed up the growth of the national economy.
Prime Minister Singh invited secretaries from the power, railway, road, shipping, civil aviation, and coal ministries, as well as the deputy chairman of the Planning Commission, to discuss the projects he had in mind.
His plan, which he believes could help return the national economy to the 9% growth rate it once had, would necessitate a huge investment worth an estimated $1 trillion for five years of construction. The government, unable to achieve that kind of revenue on its own, would be required to involve private investors through public private partnerships (PPP), as well as foreign investors.
Singh listed a number of projects that would be included in the huge infrastructure revamp:
5 railway projects
42 shipping ministry projects
Work for 9,500 kilometers (5,903 miles) of road, and maintenance on 4,360 kilometers (2,709 miles) of road
2 airline hubs at Delhi and Chennai
3 new airports
18,000 MW capacity to power sector
Dispatch of 470 million tons (MT) of coal
In the first three months of 2012, economic growth within India fell to a low not seen in nine years. This major slowdown has been attributed to government scandals, which have taken the focus away from industrialization.
But Singh wants that to change. As he said in his meeting:
“India is at a critical juncture in its quest for prosperity and eradication of poverty...We are running into more turbulent weather...There is a need to revive business and investor sentiments...and a need to create an atmosphere conducive to investment...”
“In the short term, development of infrastructure will boost investment rates across the economy. In the long run, it will remove the supply constraints that affect economic activity in agriculture, industry and trade.”
Infrastructure stocks rose after the announcement of this new plan, but Sanjay Reddy of GVK Power and Infrastructure told Reuters that no one knows what will happen next:
“It is good that the prime minister has started looking at the infrastructure sector. But the devil is in the details and we will need to wait and see what happens over the coming weeks.”
GVK Power and Infrastructure Ltd. (NSE: GVKPIL) is involved in power generation and power plant service, roads, and the airport and oil and gas sectors, many of the fields in which the prime minister has listed plans. The stock was up even higher today than last week, closing up 3.14% at 14.80.
GMR Infrastructure (NSE: GMRINFRA), another infrastructure company, closed up 4.62% at 22.65.
Investment agreements from foreign ministers began as early as this week. On Monday, India's Minister of Commerce and Industry, Anand Sharma, engaged in talks with the Brazilian Minister of Development, Industry, and Foreign Trade, Fernando Pimentel.
The two discussed the possibility of Brazil's involvement in the infrastructure projects, and a Memorandum of Understanding (MoU) was signed for cooperation in a number of areas of the sciences.
On Tuesday, Indian Union Minister for Road Transport and Highways, Dr. C.P. Joshi, also signed a MoU with Canadian counterpart Denis Label for infrastructure, road maintenance, and transportation.
More agreements like these, in addition to private sector investments, are likely to occur in the near future.