In a projection of investment requirement in the Indian economy over the next five years (2014/15 to 2018/19) for achieving an average growth of 7 per cent per annum, the Confederation of Indian Industry (CII) has estimated the figure at Rs. 280 lakh crore (USD 4.7 trillion), which is nearly double the value of Rs. 139 lakh crore (USD 2.9 trillion) that was invested in the last 5 years.
CII study titled ‘Investment Requirements in India: 2014/15 to 2018/19’, has also estimated sectoral investment targets. Monetary, fiscal, trade and other relevant policies could be realigned to help the economy mobilize the required investment, according to the study.
Mr. Chandrajit Banerjee, Director General, CII said “the study aims at estimating the future investment requirements of the economy, charting out a roadmap for investment across sectors and identifying the possible sources of funding so as to help in aligning our policies to meet the target in a time-bound manner.”
CII projects an average growth of 6.3 per cent for the industrial sector over the next 5 years, up from 5.2 per cent in previous corresponding period, for which a cumulative investment of Rs 146 lakh crore is required. Of this, Rs 98 lakh crore is to be invested in manufacturing alone, which is understandable from the fact that the sector needs to accelerate its growth and create mass employment to absorb the rapidly growing population of job seekers, either displaced from agriculture or the result of growing population.
High growth of manufacturing is also critical for sustaining elevated growth of services sector as witnessed in the last several years. Services sector in the study is projected to grow at an average of nearly 8 per cent per annum, roughly the same as in the previous 5 years period and it requires an investment of Rs. 98 lakh crore. “If manufacturing sector is able to meet the desired investment target, it should automatically lead to greater attractiveness of services sector. Having said that, there is also a vast unexploited potential in areas such as health, education, trade, financial services and tourism, where appropriate policy interventions can make a big difference”, stated Mr. Banerjee.
Agriculture sector, which continues to be heavily dependent on rain for irrigation and has recorded abysmally low productivity when benchmarked against international standards, is desired to expand by an average growth of 4 per cent per annum over the next 5 years, requiring a total investment of Rs. 36 lakh crore.
“Meeting the target of agriculture sector is perhaps the most critical from the perspective of maintaining macro balance of the economy. In recent years, we have seen how food inflation has not only affected the vulnerable sections of population in the country but has also resulted in a tighter monetary policy, thus lowering the overall economic growth. In order to usher in modernization in agriculture sector and accelerate its productivity growth, it is critical that policies are geared up to make the sector much more attractive for private sector investment”, stated Mr. Banerjee.
CII expects infrastructure investment to go up from around Rs 24 lakh crore (USD 500 billion) in XI plan period to Rs. 64.3 lakh crore (USD 1071 billion) during 2014/15- 2018/19 period. The figure is comparable to the Planning Commission’s estimate of around USD 1.0 trillion during the 12th plan period. Investment in infrastructure is estimated to average 7.7 per cent of GDP over the next five years, up from 7.2 per cent recorded during the XI plan period.
The CII study suggests that around 40 per cent of the total investment in infrastructure should come from private sector, which is lower than 48 per cent prescribed by the Planning Commission for the 12th plan period. Commenting on the need for greater investment from public sector, Mr. Banerjee said that “the private sector continues to face multifarious challenges in infrastructure and even PPP has failed to produce desired results, making the task of raising nearly half of investment from private sector, as envisaged in the 12th plan document, quite difficult in the present milieu.”
He added that among the various possible sources of public sector funding, it may be worthwhile to look at options like disinvestments, utilising the reserves & surplus of Central PSUs, disposing off the assets of sick PSUs among others.