Building The Indian Skyline

by: S&P Dow Jones Indices

By Utkarsh Agrawal

Since the global recession in 2008, India has been witnessing a slower real growth. Despite being a labor surplus country, India lacks adequate infrastructure to sustain the growth of labor-intensive industries which provide employment to the unskilled to semi-skilled workforce. The Global Competitiveness Index published by World Economic Forum placed India on the third position for the Market size and on the 85th position for the Infrastructure in its Global Competitiveness Report 2013-14. It also mentioned that the most problematic factor for doing business among others is the inadequate supply of infrastructure.

The development of infrastructure in a growing economy like India is very important to increase and maintain the sustainable growth rate in its real GDP which was approximately 4.35% in 2013 according to the World Economic Outlook Database April, 2014, published by the International Monetary Fund. Though investment in infrastructure as a percentage of GDP has been increasing over the years, the actual investment for the 10th plan was 5.15% of GDP and the projection for the 11th plan was 7.55% of GDP. It has been projected to be 9.95% of GDP for the 12th plan.

In the coming years, development of infrastructure should be a priority. Traditionally major share in the infrastructure development was contributed by the public sector. More and more participation of the private sector under the Public-Private Partnership is desirable to satisfy the growing needs.

The S&P BSE Infrastructure Index is an effort to measure the progress of the listed infrastructure in India. It has a targeted count of 30 stocks. The index aims to create a diversified exposure with five distinct clusters: Utilities, Energy, Transportation, Telecommunications and the Non-Banking Financial Institutions which are categorized by the Reserve Bank of India (RBI) as an "Infrastructure Finance Company" or derive major business revenue from Infrastructure Finance. The clusters are based on a combination of GICS sectors. It has given an annualized return of 5.11% as on April 30, 2014, since April 28, 2006.

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