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vikrum thank you very much for joining
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us today
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pleasure when people think about
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infrastructure in India they often talk
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about the roads or the airports of the
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obvious kinds of stories what do you
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think is an important story about
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infrastructure that's not being told
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that should be told I think thematically
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the issue that I would like to bring to
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everyone's attention is the
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Entrepreneurship in infrastructure and
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that I would say is is something that is
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is there is something that people should
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take a very close look at because it's a
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huge success story as it relates to the
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Indian infrastructure build out the
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entrepreneurial spirit and the risk
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taking ability of Indian entrepreneurs
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and infrastructure has been tremendous
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there are all sorts of examples I can
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give you where people have gone and
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created world-class infrastructure on
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the ground today where they did not even
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have all the approvals in place when
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they started investing hundreds of
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millions of dollars to buy the land to
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create some of the ancillary
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infrastructure before the core
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infrastructure whether it was a port or
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a power plant I actually came up with
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all the approvals and that actually is
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in a sense the story of infrastructure
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so far in terms of the private sector
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involvement in infrastructure
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development and development in India
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there's a huge entrepreneurial element
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to it
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entrepreneurs have taken a lot of risk
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have been very successful in building
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out the country's infrastructure and I
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think today if you look at the private
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sector involvement in infrastructure
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development in India over the last
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couple of years has actually been 50
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percent of the infrastructure build-out
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that's happened and I think going
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forward the private sector work will
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continue to play a very large role in
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infrastructure development in India for
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a variety of reasons one it does provide
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a commercial return be given the
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constraints that the government has on
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resources and how much it can commit to
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infrastructure development it
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necessarily needs the private sector to
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play a role and so there have been a
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variety of risk sharing mechanisms that
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have been
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been configured in order to attract
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private capital to infrastructure
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development so whether its domestic
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developers or international developers
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you will you see increasing private
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sector participation in infrastructure
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development mm-hmm and it is that
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geographically concentrated in urban
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areas this sort of innovation you're
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talking about or does it spread out to
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rural areas as well no actually there is
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a regional aspect to it and if you look
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at the the states that are the most
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developed are also the states where
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people are comfortable doing business
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and so there are certain states where
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people are uncomfortable doing business
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and and those states have been laggards
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but there are that that is one element
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to the regional disparity that exists in
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terms of how infrastructure has been
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developed the second disparity is that
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certain states have a lot of natural
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resources and they by definition
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therefore have infrastructure
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developments surrounding accessing those
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resources whether it is coal mines etc
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however those states are not that
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populated or not or are not states that
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people are comfortable doing business in
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and so those natural resources are used
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for development that's happening in
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other parts of the world so there is
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some regional disparity along those two
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lines how do you see the the private
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sector participating in infrastructure
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development in terms of in terms of its
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role is it going to increase you said it
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would see which is gonna play a large
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role but to you do you foresee changes
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infrastructure largely coming from the
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private sector as opposed to the
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government well infrastructure is an
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area where government involvement is key
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so projects that get bid out are
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initiated by government so for instance
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there's a large road program that is
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being rolled out that necessarily goes
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through a transparent bidding process
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that bid process is managed by the
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National Highway Authority of India as
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it relates to highway development for
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the state expressways there's a separate
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process but government involvement is
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key which is why building capacity
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within government
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is extremely important to get
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infrastructure development expedited
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because unless you have the technical
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legal financial capability within
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government to create a shelf of bankable
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infrastructure projects that get bid out
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for the private sector the private
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sector is not going to be able to go and
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build a road from point A to point B on
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its own because it believes it's an
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attractive stretch that's not the way it
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works
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so government involvement will continue
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to be strong but private sector
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involvement and investments a as I said
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have already grown quite significantly
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over the last few years and will
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continue to be a very large part of
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infrastructure development going forward
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now in terms of financing projects that
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obviously we've just been through a
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global downturn so it's curious to know
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how that downturn affected idfc and the
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industry in general yeah I first about
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the infrastructure landscape more
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broadly and how that was impacted by the
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downturn I think you know infrastructure
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development is very much a domestic
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story and so to that extent global
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downturn has some impact because
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infrastructure development in India is
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dependent on international capital and
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to the extent that that is not
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forthcoming it does affect the capital
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that is available to the private sector
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developers so that is the effect that
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the global downturn had in terms of
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access to capital access to capital for
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a period of time was very limited and
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with risk aversion there were only a
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certain set a certain type of company
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that actually got access to capital
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whether debt capital or equity capital
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given the liquidity squeeze that happen
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globally and also domestically and so to
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that extent obviously a lot of the
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infrastructure developers in India also
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went through a period where they did not
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really have access to capital and there
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was no liquidity where the debt or
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equity the other aspect in terms of the
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impact on Indian infrastructure from a
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longer-term perspective or at least from
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a medium-term perspective is the
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following
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a few years ago the infrastructure story
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was largely at China India
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story in terms of where infrastructure
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was being built globally it was
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primarily China and India post the
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downturn
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I think infrastructure development has
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become a theme globally so even the
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United States is focused on
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infrastructure development as are other
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developed parts of the world and so it's
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no longer a China India story which
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means that Indian infrastructure has to
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compete with infrastructure being
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developed in other parts of the world so
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whether it is for capital or whether it
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is for technology or whether it is
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developer interest if a developer has an
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option between developing a Turnpike in
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the United States versus developing a
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road in India the risk return trade-off
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has to work for an international
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developer to focus on India because he
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now has an option of focusing on more
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developed markets so that is that that
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is another element of the impact of the
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downturn because government spending has
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become important in all parts of the
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world including the developed markets
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and infrastructure is an area where
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government spending can be quite
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substantial now if you had to prioritize
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infrastructure projects in say urban
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areas first how what would you think
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would be most critical to finance I
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think the crying need in urban
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infrastructure his is on his own two
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fronts one is urban transportation and
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the second I would say is surrounding
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sanitation and and water supply so if
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you have obviously power but you know
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places like Bombay Delhi now have some
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element of private power etcetera
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available but in that order I would say
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urban transportation power water
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sanitation those would be the areas to
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focus on okay now moving that to the
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rural regions how would you prioritize
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in the rural areas
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I think connectivity is is again
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critical so having roads
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extremely important again it's the same
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thing it's roads power primarily I think
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from a macro perspective the two largest
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opportunities for infrastructure and
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India as power and roads I think if you
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just look at the macros and the huge
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deficit that we have in the country
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today more than half the country does
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not have electricity 2% of the country's
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roads and national highways carrying 40%
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of the traffic so this is a huge
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build-out that's required not only in
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terms of making it more efficient to
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move goods from point A to point B but
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also from a connectivity perspective
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which is the urban to rural etc and
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power is just a huge deficit today and
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whether it's rural or urban I think even
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in many tier one and certainly tier 2
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and tier 3 cities you don't have 24
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hours power there's load shedding for
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several hours in the day you don't have
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power even and in metros so it's not
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only concentrated not only related to
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tier 2 tier 3 cities yeah so power I
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think is critical if we have to grow at
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8 percent plus GDP you can't grow
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without power right right well looking
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ahead five years down the road or even
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10 years how do you envision
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infrastructure in India what kinds of
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changes are we likely to see you know I
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think it's useful to try and look at
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history in some sense in terms of how
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some of the infrastructure sectors have
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developed over time and Telecom was the
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first sector that liberalized in the
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late 90s and the telecom experiment has
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been a huge success today the telecom
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industry in India is a huge industry and
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telecom rates are the lowest in the
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world we're adding 10 million
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subscribers a month so the industry is
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growing very rapidly today you have you
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know even a street vendor having a
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mobile phone so I think the telecom
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story is a huge success I think that
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could be replicated in many other areas
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primarily again
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powerin roads where you could see huge
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opportunity and as and as you see the
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middle class getting the benefits of
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those enhanced services that is what
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resulted in the explosion in in telecom
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and in the mobile connectivity etc that
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the expectation from the middle class is
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is is quite high and there is people are
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willing to pay for quality
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infrastructure you know initially there
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was also some skepticism about what
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people pay tolls people have been used
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to traveling free why would anybody pay
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tolls people are more than happy to pay
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tolls has been the experience because
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you're able to get from point A to point
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B a lot faster and I'm on a much better
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Road in a comfortable way cutting down
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your travel time cutting down your fuel
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costs exactly exception people are
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willing to pay for quality
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infrastructure and I think the middle
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class as it is developing rapidly will
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transform many of these areas the way
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telecom or media or some of these
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revolutions have happened in the country
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is it that they'll have a willingness to
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pay taxes for power or for you to help
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develop further infrastructure
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potentially I think already today there
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is a road cess that is being collected
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by the government primarily to finance
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some of the road development that's
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going on that is built into the tax
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system so I don't think I don't think
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people will have an issue provided they
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see that their money is really being
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used for productive purposes the problem
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with government expenditure and India's
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is just a lot of leakage and the amount
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of money that actually goes for the
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purpose for which it was mobilized is
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only a fraction and so I think in many
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ways that's another reason why
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involvement of the private sector and
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developing quality infrastructure is
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critical
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well thank you very much for speaking
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with us today thank you said it I
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appreciate the opportunity
