MUMBAI - INDIA needs to double infrastructure spending over the next five years to sustain its current pace of economic growth, said Finance Minister Palaniappan Chidambaram.
To do this, India will need to attract overseas investments to fund this infrastructure expenditure, Mr Chidambaram told a seminar in Mumbai yesterday alongside US Treasury Secretary Henry Paulson, who is on a three-day visit to India.
India needs about US$100 billion (S$145 billion) each year until 2012 to modernise and expand its transportation and power network to attract more overseas investors and boost economic growth.
In separate reports this month, the Organisation for Economic Co-operation and Development and Lehman Brothers Asia said improving infrastructure such as roads and ports is a vital element in India's plan to accelerate annual growth to 10 per cent in the next five years.
Prime Minister Manmohan Singh has said that better infrastructure will attract more factories, generate employment and improve the lives of the third of India's 1.1 billion people who the World Bank estimates live on less than US$1 a day.
Highways, which move almost 80 per cent of the goods transported in India, account for only about 2 per cent of the country's roads.
It takes an average 85 hours to unload and reload a ship at India's major ports, 10 times longer than in Hong Kong or Singapore, according to government figures.
Ford Motor, which has a factory in southern India, requires its engine supplier in the central state of Madhya Pradesh to install global positioning system devices in its delivery trucks to locate vehicles stuck in traffic so that it can adjust production schedules.
But Mr Chidambaram is cautious about adopting financial-sector reforms to help attract much needed foreign funds for infrastructure works, preferring to undertake them in a 'calibrated manner'.
'We are concerned about inflows from unregistered entities and unregulated jurisdictions,' Mr Chidambaram warned.
US Treasury Secretary Paulson urged India not to limit capital flows, which he warned would hurt the country's competitiveness.
'I urge my Indian colleagues to continue, and accelerate, their efforts to liberalise the economy and develop the financial system to assure that the vibrancy and growth that the Indian economy now enjoys continue well into the future,' he told the conference.
Mr Paulson also lauded India for allowing the rupee to appreciate.
'India has let market forces operate and ...that hasn't affected India's economic performance,' he said.
Meanwhile, German Chancellor Angela Merkel began a four-day visit to India yesterday hoping to achieve closer business ties between the two countries.
The Chancellor is accompanied by a 30-strong delegation, including the new chief of industrial conglomerate Siemens, Mr Peter Loescher, and senior managers from chemical company BASF and the Deutsche Bahn railroad firm.
It will be the German leader's first visit to India.
