NEW DELHI: Private investment in India’s infrastructure development has sharply declined to less than one-fourth from $160 billion to $39.2 billion over the past decade, according to a report by Knight Frank India.
In percentage terms, the contraction was 39.2 percentage points over the decade from 46.4 per cent to 7.2 per cent of total investments.
The drop of over 39.2 percentage points private investment underscores a growing reliance on government-led funding, raising concerns about fiscal sustainability as the country pursues its $7 trillion economy goal by 2030.
In its report, India Infrastructure: Reviving Private Investments, Knight Frank emphasised the need for $2.2 trillion in infrastructure investments to support the 10.1 per cent annual growth rate required to achieve the target.
However, the declining share of private investment has created added pressure on government budgets, potentially widening fiscal deficits.
Rising fiscal pressure
“Private sector investment in infrastructure has decreased significantly, shifting the burden to public spending. While the government has shown a strong impetus toward infrastructure development, this trend risks straining fiscal deficit targets,” the report noted.
The central government aims to reduce its fiscal deficit to below 4.5 per cent by 2025, making private participation crucial for long-term economic stability.
Knight Frank India CMD Shishir Baijal highlighted improvements in India’s infrastructure rankings, such as its climb in the Logistics Performance Index from 54 in 2014 to 38 in 2023, as evidence of policy-driven progress. However, he also stressed the need for radical reforms to revive private sector involvement.
Opportunities for growth
The report identified sectors like renewable energy, roads, highways, warehousing, and logistics as areas with high potential to attract private investments.
Rapid urbanisation and shifting demographics have also created opportunities in urban mass transit, airports, and power distribution. “Increasing private participation will not only balance fiscal pressures but also free up government resources for critical sectors like healthcare and education,” Baijal said.
