FACTBOX: India's infrastructure needs

(Reuters) - India needs to invest $500 billion in road, port, housing, railway, airport, and telecommunications infrastructure over the next five years, the Planning Commission has said.

Here is an overview of various initiatives aimed at driving up infrastructure spending from five percent to nine precent of GDP by 2012.

PUBLIC-PRIVATE PARTNERSHIPS (PPP):

-- Public projects financed by private capital, or PPP projects, could net $22 billion investment over the next five years in the transport, power, water supply and tourism industries, according to Finance Ministry figures.

-- The India Infrastructure Project Development Fund (IIPDF), unveiled in the 2007-8 budget, contributes up to 75 percent of project development funds as an interest-free loan. It aims to address problems such as a lack of capacity to meet long-term equity and debt financing needs.

PPP IN THE TRANSPORT SECTOR:

-- India's antiquated and saturated road and rail system has become a major target for PPP investment, receiving about $7 billion in 2006.

-- With PPP funding, India has almost completed a showcase four-lane highway, the 5,900 km (3,700 mile) 'Golden Quadrilateral', linking Delhi, Mumbai, Kolkata and Chennai, under construction since 1999.

SPECIAL ECONOMIC ZONES (SEZs):

-- Almost 400 companies, ranging from small apparel makers to India's largest company, Reliance Industries (RELI.BO: Quote, Profile, Research, Stock Buzz), and global mobile phone giant Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz) are setting up shop in hundreds of tax-exempt SEZs, in a roll-out that has seen states from West Bengal to Rajasthan competing to offer investors tax breaks and flexible regulations.

-- The Ministry of Commerce expects the zones will attract $5 to $6 billion of foreign direct investment (FDI) by the end of Dec 2007 and provide a shot in the arm to infrastructure, though analysts point out India's zones are not as large as in China.

-- Boosting labor-intensive manufacturing industries producing textiles, apparels, footwear and car components among other goods, the zones draw mainly on young, unemployed rural workers, and are projected to create an additional 1.7 million jobs by Dec 2009.

STICKING POINTS:

-- Despite the billions budgeted for ramping up basic services, business enthusiasm could still be dampened by the sector's long gestation period compared to areas such as manufacturing, and a host of frustrations on the ground. Power outages and utility interruptions are common in most cities, and no city in India has water 24 hours a day, seven days a week.

-- In some fast-growing cities such as Chennai, Bangalore and Hyderabad, the quality of drinking water is actually getting worse, the World Bank has said.

Sources: Reuters, Special Economic Zones in India (http://sezindia.nic.in/HTMLS/about.htm, and approved SEZs: here  Continued...