Invest 7% of GDP in core sector: CII

The Confederation of Indian Industry has said a minimum of 7 per cent of GDP, which translates to about Rs 200,000 crore (Rs 2000 billion) a year of investment, has to go into gross capital formation in infrastructure for sustainable growth.

The members of CII's national council, which met in Chennai and reviewed the economy, felt that a minimum of 7 per cent of GDP has to go into gross capital formation in infrastructure. This translates into Rs 200,000 crore a year of investment, CII said in a statement.

The private sector can do at best 20 to 30 per cent of this investment, therefore, the balance has to come from the government. Currently, it is estimated that the investments are only half of what is needed, it said.

The chamber asked the government to ensure on-the-ground implementation of many infrastructure projects like roads, ports, power, coal projects, and airports.

With enhanced investment in infrastructure, the current high rates of growth would be definitely sustained, said the CII release.

The members were clearly upbeat on the growth in the current year, in all areas of the economy--manufacturing, services, and agriculture-- despite high oil prices, it said.

"VAT collections were up, inflation was moderate and non-food credit was rising by more than 20 per cent. The fiscal deficit was coming down, and various agencies were all forecasting GDP growth rates higher than 7 per cent for 2005-06," CII said.

While upbeat on the economy, the chamber said a higher growth rate in the core sector was needed.

"Core sector includes electricity generation, coal production, cement production and production of crude petroleum. CII believes that the core sector must grow as fast as, if not faster, than the GDP growth, to sustain the economy and prevent capacity constraints from coming up," the release said.

Focus in electricity generation should be on nuclear energy and non-conventional energy. Nuclear energy plants, whose cost is coming down with advances in technology, can be set up on the coast so that the plants have access to water, it said.

Greater liberalisation in the area of coal to attract higher investment in mining would help tide over any shortages of coal affecting manufacturing units and power plants, it added.

To attract large investments in infrastructure, a proper regulatory framework is important, one that is transparent, empowered and independent, it said.