Mumbai: India will have to double the rate of infrastructure investments to Rs 40 lakh per annum to achieve long-term economic growth ambitions, a senior banker said on Wednesday.
The country currently invests around Rs 20 lakh crore annually in infrastructure, he said, underlining the need to significantly scale up investments in both infrastructure and manufacturing.
"Infra itself needs about Rs 800 lakh crore of investment in the next 20 years. That is about Rs 40 lakh crore every year kind of investment. We do hardly Rs 20 lakh crore now. Similarly, manufacturing capex also needs huge investments," Rajkiran Rai G, Managing Director at NaBFID, said during a panel discussion at the annual FIBAC event here.
"When we talk of capex, actually, it is more from the manufacturing and infra, both together because manufacturing capex also have to go up because as a country, we skip the manufacturing growth, we jumped into services sector first," he said.
While the services sector had contributed significantly to India's growth and helped the economy move towards the USD 4-trillion mark, manufacturing investment needs to rise substantially, he said.
"I think now the PLI and other things are pushing that and a lot of things are happening. So, manufacturing capex is very important and infra investment is very important. We ought to practically double our investments, what we are doing, from what we are doing now, to reach that nine per cent growth and in a very sustainable way," he said.
He added that it is not that one year we do and all that. It has to be done continuously to sustain that growth. Otherwise, USD 30 trillion economy will be very difficult to achieve, Rai warned.
He said the next challenge would be determining how the massive funding requirement would be met.
The NaBFID MD pointed at the growing pool of domestic long-term savings. He cited assets under management of pension, insurance and provident fund schemes at Rs 125 lakh crore -- which is almost 50 per cent of the scheduled bank deposits -- and they are easily growing at 15-20 per cent, whereas scheduled banks are struggling to grow liabilities at 9 per cent.
The growing pool of long-term savings could increasingly finance infrastructure and other long-duration assets, he said.
He said funding infrastructure through traditional lending alone would not be sufficient and financial institutions would increasingly need to originate projects and distribute the exposure to other investors.
He added that insurance, pension, and provident funds will be among the biggest contributors to financing India's next phase of growth.
"The next phase of growth, we will see participation of different kind of saving tools coming into this sector. Some ecosystem changes, some regulation changes may have to happen. It is gradually happening," he said.
The shift would eventually reduce dependence on bank balance sheets for funding long-term infrastructure projects.
