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Capital Markets

India falls short on infrastructure

Government likely to miss 2012 goal by $100 billion; Land acquisition is biggest constraint

A power station in New Delhi. India’s power shortfall has widened to about 13% this year

India’s government is likely to miss its target on infrastructure spending for the five years ending March 31 2012 by at least $100 billion, according to a leading fund manager. The government plans to spend $500 billion building roads, ports and power supply, according to its most recent five-year plan. But Alroy Lobo, chief strategist and global head of equities and asset management at Kotak Asset Management, reckons the eventual figure will be between $350 billion and $400 billion. In the power sector, for example, he says that at best 60MW to 62MW of capacity will be built by the time the country’s 11th five-year plan ends, well below the target of 72MW. While Lobo acknowledges that the infrastructure shortfall will be partly a result of the financial crisis, he says there is another more pressing impediment.

"The biggest issue is land acquisition," he says. "Until the land acquisition issue is resolved, infrastructure projects are at risk."

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