India's Prime Minister Narendra Modi believes infrastructure is the key for his economic revival programme and has started spending big on road, bridge and rail building across the country.
Weeks after International Monetary Fund and World Bank announced they expect India’s economic growth to surpass China’s - the world’s second largest economy - for first time since 1999, many analysts say that expectation may become reality.
India doubled spending allocations for roads and bridges, and raised the rail budget by a third, in the 2015/16 fiscal year, as the Modi government has been working to speed up infrastructure projects that were blocked due to bureaucracy or lack of private sector investment.
The Indian economy grew 7.5 percent in the quarter ending in March, easily outpacing China, Reuters reported. The IMF and World Bank expect similar growth numbers for 2015, and announced that they are expecting an ongoing expansion over the next few years.
In contrast, the downward pressure in China’s economy is continuing to be reflected in future forecasts. The country’s rate of economic growth has declined to 6.8 percent in 2015 from 7.4 percent in 2014. This will be the slowest growth since 1990.
According to Reuters, as big Indian corporates and the private sector have been slow to invest in many areas, the government has pushed public banks to fill the void. The Modi government started road and rail projects with state funding and provide monetary and legal incentives for private investors to join highway projects.
A new $3 billion infrastructure fund was set up, and the government hopes to build 30 km of road a day, instead of the 12 km being built at present.
But some officials criticise the plan, saying the numbers do not add up and urge PM Modi to come up with a "consistent policy" to draw more private investors into the development drive.