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India Has $1 Trillion Infra Deficit: FM Tells World Bank

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India has a $1 trillion infrastructure deficit over the next five years, Indian Finance Minister P Chidambaram has told the World Bank, which wants private sector participation to bridge the funding gap.

Chidambaram met World Bank President Jim Yong Kim on the sidelines of the annual Spring meeting of the International Monetary Fund and the World Bank. At a public event in Washington along with UN Secretary General Ban Ki-moon, Kim stressed on the importance of private sector participation on meeting such a massive funding need.

"I just met with the Finance Minister of India this morning, and he told me that, in India, they have a $1 trillion infrastructure deficit just for the next five years," Kim said. "So, all of the official development assistance combined won't even meet half of India's infrastructure development needs. So, we've got to get the private sector involved," he said.

Chidambaram is in Washington to attend the annual Spring meeting of the International Monetary Fund and the World Bank. No further details of Chidambaram's meeting with Kim were available.

"Now, at the World Bank Group, we have the International Finance Corporation, and specifically what they do is they say, 'We want to be sure that private investment, in infrastructure in ports, in roads, in telecommunications actually has the greatest development impact'". "So, our team at IFC, if--they get extra credit, they get better evaluations of the investments they make and the investments they bring in actually have a development impact," Kim said.

He said the World Bank has zero tolerance for corruption. "You have to have an absolute zero tolerance for corruption, and that's exactly the way we've done it," he said, as he referred to Bangladesh where the Bank had to suspend work on a bridge and, in the process, debarred a company.

"We just did that, and it was the longest debarment in our history. They are now prohibited for working on any of our projects for 10 years, and you have to have a complete, zero-tolerance approach and that is what we do in the World Bank Group," he said.

To address the concerns of the Indian economy, the authorities have taken several measures in the recent period, Chidambaram pointed out.

The policy focus in recent months has been, on containment of fiscal deficit, along with measures that would boost investment levels in the economy and help raise the growth rate, he said.

A Cabinet Committee on Investment (CCI) has been set up to remove blockages and fast-track the implementation of large projects, especially infrastructure projects, the Finance Minister said.

Informing the IMF meeting that a plan is being implemented to gradually roll out direct cash transfers using Unique Identification Numbers (UID) beginning 2013, Chidambaram said eventually, cash transfers will be the preferred mode for the disbursement of subsidies and other monetary benefits to improve efficiency and avoid duplication and leakages.

Efforts are underway to pen the laws and implement the Goods and Services Tax (GST) and the Direct Tax Code (DTC) as early as possible, he said.

Inflation in India has begun to moderate, he said, noting that core inflation, in particular, has moderated significantly.

"Together with the measures taken for fiscal consolidation, this has provided space to the Reserve Bank of India for some monetary easing. To address growth concerns, the Reserve Bank has cut its policy rates twice during the last three months," he said.

Observing that the authorities in India are concerned with the twin deficits and are taking measures to contain them, the Finance Minister said the gross fiscal deficit has been reduced from 5.8 per cent in 2011-12 to 5.2 per cent in 2012-13 and it has been budgeted still lower at 4.8 per cent for 2013-14.

Public debt continues to follow a downward trajectory with the central government's gross debt declining to 45.9 per cent of GDP during 2012-13, the Finance Minister pointed out.

India's current account deficit has remained elevated during the last several quarters mainly due to widening of the trade deficit reflecting weak external demand and large imports of oil and gold, he said.

"Although the current account deficit has been financed by increased capital flows, the government is committed to bring it down over time. Various measures taken by the government combined with recent monetary policy easing by the Reserve Bank of India are expected to revive investment activity and help take the economy to a high growth trajectory," Chidambaram said.

Since the onset of the current global crisis, unexpected developments keep occurring periodically and add to uncertainty, he said. It would not be overstating matters to say that the key to global stability is to restore stability to Europe, the Finance Minister pointed out.

"While Europe has to be commended for the steps it has taken so far, they may prove to be inadequate unless the major policy measures announced recently, such as the setting up of a Banking Union, are completed," he said.

Continued fragmentation of the banking system and delay in cleaning up banks may result in continued economic weakness. There is also need to make further progress in strengthening the economic and monetary union, Chidambaram said.

Restoring growth would be the key driver to addressing the debt problem in the Euro area, the Finance Minister said.

According to Chidambaram, despite some slowdown, emerging market economies remain the strongest source of global growth, reflecting resilient domestic

demand conditions and healthy banking sectors.

"Growth in emerging market economies (EMEs) is now beginning to pick up. Capital flows to these economies have increased, reflecting improved financial

market conditions, but they are also a consequence of the excess liquidity in global markets and the search for higher yields," he said.

"Consequently, policymaking in EMEs will need to continue to be vigilant to the possibility of financial instability resulting from any reversal of capital flows.

Volatility in oil prices also remains a concern for EMEs," Chidambaram said.

(PTI)