India announces $11bn infrastructure fund

India has decided to set up a fund worth $11bn to accelerate the growth of its infrastructure, for which it is seeking strong private sector participation. A five-year road programme is also dependent on attracting private sector funding.

The Indian government has announced plans to set up an $11 billion growth fund to invest in its infrastructure. The fund is to be set up by the Planning Commission of India under a special arrangement that will see it owned by banks and financial institutions.

Of the $11 billion, the government plans to attract at least 40 per cent from international pension funds, insurance funds, sovereign wealth funds and multilateral agencies, while the rest would come from domestic sources.

Separately, the government said it is banking on the private sector for the bulk of $60 billion of investment needed to complete an ambitious five-year programme to bridge its road deficit.

Road Transport and Highways minister Kamal Nath told the Press Trust of India (PTI) that out of the $60 billion, $40 billion will come from the private sector. He added  that foreign investors are expected to bring in $10 billion.

Nath told the PTI that India offers a huge opportunity for foreign investors. “With 33% growth in the automobile sector, highways offer a huge opportunity for the investors,” he said.

Last year the minister announced a target of an additional 35,000 km of highways under the ambitious 20 km-a-day project. However, according to the latest government data, one-third of the ongoing infrastructure projects in India as at March 31st 2009, were delayed and their costs overran initial projections by 54 percent.