India requires $1.7tr for infra over next decade

Goldman Sachs says its estimate is considerably higher than previous forecasts, but it believes the country can support the colossal figure. Goldman also said it expects investment returns to rise due to falling costs and policy changes.

A report by Goldman Sachs suggests India requires $1.7 trillion in financing over the next decade to meet its infrastructure needs.

Though a gargantuan sum, the Wall Street investment bank also says India could afford its massive infrastructure needs. It says detailed analysis suggests corporate, banking, household, government and external sector balance sheets are “robust” and can support the vast figure.

In a further boost to the country’s aspirations to modernise, Goldman Sachs said returns are expected to rise on the back of “increasing returns to scale” and falling costs as well as critical policy changes.

Its report concludes: “India’s infrastructure space is likely to remain a hotspot for global and local infrastructure supplers, investors and capital markets”.

Of the $1.7 trillion required, Goldman Sachs says power and roads alone may require upwards of $700 billion. This is far higher than the Indian government’s previous estimate of $500 billion for the period 2007-2012 and indeed Goldman Sachs’ own previous estimate of $620 million.

“Our estimates are merely indicative, but they suggest that barring China, India could dominate infrastructure demand in the rest of the emerging world over the coming decade.”

The findings come in the same month as minister for road transport and highways, Kamal Nath, said US pension funds were expected to contribute the lion’s share of overseas investment into India’s roads network.

During the presentation in New York, Nath said overseas investors were likely to commit $10 billion to the country’s roads over the next three years. He added that “buyout firms” would most likely invest in road building while pension funds would commit capital to the “post-construction” stage.