Infrastructure: One Of The Core Investment Areas In India

Infrastructure: One Of The Core Investment Areas In India

General Electric Company (NYSE: GE) plans an investment of $250 million in infrastructure and healthcare projects in India, in the light of its intentions to enhance its presence in the country. Infrastructure projects are at the top of GE's investment agendas in India. The company is reinvesting the entire proceeds from the settlement of Dabhol power project, valued at $145 million, in the infrastructure projects of India. As per the company, India is a market set to realize its potentials. GE will be investing in healthcare, cleaner energy, cleaner water and aviation.

The company is focusing on making products, which would meet India's needs. For instance, the "HF Advantage" X-ray system developed at the John F. Welch Technology Centre in Bangalore. The John F. Welch Technology Centre, $80 million state-of-the-art facility is home to 2,200 scientists, researchers and engineers.

However, U.S. companies have not been very happy about the infrastructure in India. As per the companies, infrastructure, seconded by the bureaucratic hurdles, has been one of the major impediments for flow of funds/investment into India.

Infrastructure bottlenecks like ports, airports, roads and smooth energy supply are the major impediments, which need to be addressed soon. The Indian government is supporting greater investment in roads, export facilities, power and other infrastructure. India has widely opened its door to foreign investors. Foreign Direct Investment (FDI) of up to 100%, under the automatic route, has been permitted in housing, built-up infrastructure and construction-development projects.

However, due to recent government initiatives and pouring investments, the ports and roads of India have been improving. About four years ago, Koyo Steering Systems, an auto parts maker, incurred heavy losses on account of retaining a month's inventory due to delayed deliveries. While traffic jams seem to be a prime concern, the situation has been improving on other counts.

Following are the areas where U.S. and India may consider opportunities for partnership: 1. Technology Exchange, 2. Energy Security, 3. Physical Infrastructure Development, 4. Human Resource Development, 5. Intellectual Property Protection and 6. Trade and Industry Promotion.

U.S. is one of the largest foreign direct investors in India. The FDI inflow from U.S. accounts for almost 11-12% of the total FDI inflow into India. Following sectors are reported of attracting FDI from the U.S.: Fuels (Power & Oil Ref.) (35.93%), Telecommunications (radio paging, cellular mobile & basic telephone services ( 10.56%) Electrical Equipment (including Computer Software & Electronics) (9.50%), Food Processing Industries (Food products & marine products) ( 9.43%), and Service Sector (Fin. & Non-Fin. Services) (8.28%)

The Indian government is focusing on improving the infrastructure scenario in the country. 48 new road projects valued at $12 billion are under construction. Development and up-gradation of roads and airports would call for investments of $24 by 2008 and $33 billion in the coming ten years respectively. The health industry is expected to grow by over 100% of its current size of $17.2 billion to $40 billion by 2012. Healthcare spending too is expected to double in the next 10 years. However, private healthcare spending is expected to rise from the current of $14.8 billion to $33.6 billion in 2012. India also plans an addition of around 0.1 million MW of generation capacity by 2012. Presently 100% FDI is permitted for construction and maintenance of ports. The government is also offering incentives to the investors.

ValueNotes analyst Surya feels that, private sector participation in the development of Indian infrastructure will grow tremendously as the government policies will be more investor-friendly. This would benefit the private players as well as India as the requirements of both the parties would be fulfilled. India will be endowed with good infrastructure while the investors will have access to one of the largest markets in the world.