Infrastructure Investment in India: Squaring Theory, Data and Common Sense

Abstract

The study makes a novel attempt to estimate the quantum of funds channelised in the physical infrastructure sector, by the private–public split as well as per project parameters. The study finds a downward trend in the private investment in infrastructure post 2009–2010. This needs to be understood in correspondence with the rise in the number of stalled/shelved projects under private ownership post 2008–2009. This rise in the locked-in finances could explain the disincentive in making fresh investments by the private sector. However, what this data also reveals is that the average per stalled/shelved project cost is higher under public ownership even though the number of such projects isfound higher under private ownership. Lumpy project investments are locked in public projects that can be viewed as a real cost. Fiscal prudence leaves little scope for further extension of finances from the government’s kitty in this domain. Moreover, commercial banks cannot be relied on due to the staggering share of non-performing assets emanating from the over exposure to this sector. A market for long-term debt could be a panacea for the perils facing the sector as well as the stressed banking sector. JEL Codes: E01, E22, E69, G31