Mumbai: India will require $1.7 trillion (around Rs82.3 trillion) in financing over the next decade to meet its infrastructure needs, Goldman Sachs said in a note on Wednesday.
The figure is higher than Goldman Sachs’ earlier estimate of $620 billion, while the government’s projections for the 11th Plan for 2007-12 envisages $500 billion (Rs 24.2 trillion) in infrastructure spending.
Goldman Sachs said it estimates that in the decade to 2020, India would need to more than double its electricity capacity, increase length of paved roads by half, and add substantially to its railway, irrigation, ports and airports to keep pace with economic growth and urbanization.
Domestic savings: Goldman Sachs says India will be able to raise the finances required to develop infrastructure domestically. Rajkumar/Mint
However, India will be able to meet its infrastructure financing needs domestically, without significant recourse to external capital, on account of a rising domestic savings rate and robust balance sheets, it said.
Goldman Sachs expects gross savings rate in Asia’s third largest economy to rise to 40% of the gross domestic product, or GDP, by 2016 and remain at high levels for well over a decade. India’s domestic savings are on a sustained upturn, primarily due to favourable demographics, and also due to rising GDP growth and lower per capita incomes, Goldman Sachs said.
It also said that household savings can be intermediated through the financial sector to the government, which then spends on infrastructure.
However, it would be more efficient if household savings were channelled directly to the infrastructure sector through pension or insurance funds, it added.