“We have been able to sustain growth in the face of global slowdown essentially on the strength of the infrastructure creation in India where the gap is huge,” Jaitley, who is in China to attend the Board of Governors of the Asia Infrastructure Investment Bank, said.
“Over the next decade, we require over $1.5 trillion in India alone to fill up the infrastructure gap. We also use the additional resource which is available with us as a result of falling prices because that regime helps us,” he said, adding that the government intends to connect seven hundred thousand villages with roads by 2019 as part of a massive modernisation plan.
Jaitley underlined that infrastructure development is key to halt the global economic slowdown. “Infrastructure is where inequalities exist and the requirement of large number of economies world over is to fill up this infrastructure gap,” he said.
Jaitley was addressing a seminar on “Infrastructure and Global Economic Growth” organised by China-sponsored AIIB along with finance ministers of many countries. “Over the next decade the world needs trillions of dollars to fill up this gap. I think it is extremely important if the world is to be pulled out from the present slowdown phase, infrastructure development holds the key,” he said.
He also spoke of massive rural sanitation programme as part of India’s current infrastructure programme. “In terms of highway construction this year alone our target is 10,000 kms. Our railway system is over 100 years old. We are going in for a massive modernisation,” he said.
Jaitley said the government is seeking private sector participation in converting railway stations into commercial hubs. The government plans to build more airports, sea ports and generate more power, particularly renewable energy which is ecologically also better from all points view, he said. “These are all the emphasis areas we have undertaken,” he said. About arranging funding for the massive development, he said, “We realise that starting point is public finances.
It is only when the public finances are put into it, you start attracting and the activity begins with a lot of private funds”.
At the same time, there are large number of developmental institutions like the World Bank, ADB which put in lot of money because infrastructure funding also brings in long-term returns on a sustainable basis, Jaitley said. The government has set up India Infrastructure Investment Fund where the government holds minority stake, Jaitley said.
“This a new experiment we have undertaken which we hope will be a success,” Jaitley said, adding that the emphasis of India in the next decade will be to fill up the infrastructure gap which will also generate growth, employment and pull up number people out of poverty.
“In our bid as an emerging economy, graduating into developed economy category, we feel that this is extremely vital for a country with a large population like India,” the Finance Minister said. Projects succeed when risks for investment in projects are reduced and eliminated, Jaitley told the seminar. He said “the risk element (for investments) has to be minimised and virtually eliminated. It is only then the infrastructure creation can take place at a faster pace,” he said.
“The projects have to be bankable, there has to be social acceptability of the fact that users must pay for infrastructure. Infrastructure does not come for free,” he said. “So if it is a road, those who use it have to pay for it. If it is an airport or sea port, users must pay for it,” Jaitley said.
“Those who use power must pay the actual tariff. Concessional tariffs do not work beyond a particular point,” he said. “They make infrastructure creation itself difficult. Therefore reduction and finally elimination of risk element will involve the social acceptability, where the society accepts the principle that the funding of infrastructure eventually has to come from users themselves. That is how the projects become bankable,” he said.
“Otherwise the risk element will remain and projects will stop halfway, be incomplete,” he said. Besides Jaitley and his Chinese counterpart Lou Jiwei, those who took part in the seminar were Pierre Egide Gramegna, Minister of Finance, Luxembourg, Imad Najib Fakhoury, Minister of Planning and International Cooperation, Jordan, Jin Liqun, AIIB President and Chris Heathcote, CEO, Global Infrastructure Hub, Thomas Maier, Managing Director, EBRD and Chair of the WEF Global Agenda Council on Infrastructure.