USD1.5 tn investment needed for 9.5 pc growth

New Delhi, Jan 7: India need a capital investment of 1.5 trillion dollars to set itself in a growth trajectory of 9.5 per cent in the Eleventh Plan period.

To generate the required investment, Foreign Direct Investment (FDI) should be given due care as there exists a great potential to increase its magnitude and also it brings along the required expertise as well as technology, the industry chamber Confederation of Indian Industries (CII) says.

''The current inflow of FDI is in the order of one per cent of GDP, and we hope favourable global environment should see India targeting about 2.5 per cent of GDP as FDI, CII President R Seshasayee says.

He said that the stage is set for the economy to move to the next level of growth trajectory in the next few years, but at current rates and with no changes the economy would probably manage just about 966 billion dollars over the next five years.

''We expect that the incremental capital output ratio (ICOR) for the Plan period (2007-2012) to witness a slight deterioration to 3.8 per cent from the current level of 3.6 per cent,'' Mr Seshasayee adds.

He further says that this decline will be more than compensated by an increase in investment to GDP ratio on an average to 36.2 per cent from the current level of about 30 per cent.

Therefore, the crucial issue will be to mobilise the required investment for the purpose.

As regards increasing the investment from other sources, CII recommends the Investment Commission report, which has underlined the key hurdles that have so far impeded investment growth.

The Investment Commission in its report had identified the factors ranging from investment restriction and lack of level playing field to poor state of infrastructure.

Outlining the poor condition of infrastructure, CII indicats that infrastructure spending by the end of Eleventh Plan should go up to atleast 10 per cent of GDP.

According to a CII study, over the next five years a cumulative of 337.5 billion dollars is required to be invested in infrastructure in order to achieve an average of 9.5 per cent GDP growth during the Plan period.

Of this, about 84.4 billion dollars should be the target for private sector contribution to infrastructure investments, provided all necessary enablers are in place.

''The government should seriously consider leveraging a larger external debt for India. Among the emerging nations, India has one of the lowest external debt to GDP ratio and a modest increase in this would not be of any significant risk, provided India is able to leverage this effectively,'' CII suggests.

Appreciating the performance of public private partnerships (PPP) so far, CII says in order to strengthen this model the government needs to focus on resource building and imparting understanding of PPP and its formatting to officials in the centre and especially the states.

''Creation of an oversight panel on PPP is essential, which could both track the development of PPPs and also have a system of vigilance and rating for such projects.''

UNI