The slowdown in GDP growth has hardly had an impact on infrastructure investments, points out the recently released statistics on savings and investments brought out by the Central Statistical Organisation (CSO). The new figures, with 2004-05 as the base year, show that overall investments in infrastructure went up from Rs 253,035 crore in 2007-08 to Rs 307,282 crore in 2008-09, a rise of 21.4% which was only marginally less than the 22% clocked in the previous year when the economy grew by 9.2%.
The buoyancy of investments in the infrastructure sector is remarkable as the investment to GDP ratio of this segment, which includes, electricity, gas & water supply, railways, road, airports and ports, storage and communications, has gone up from 5.1% of the GDP at market prices in 2007-08 to 5.5% in 2008-09, an all time high, even as overall investments in the economy decelerated sharply from 37.7% of the GDP to 34.9% of the GDP.
What accounts for this sharp change in the fortunes of the infrastructure sector? A look at the numbers show that everything is not hunky dory as the growth rates vary substantially within the sector ranging from a substantial 76% in communications, where investments shot up from Rs 33,335 crore to Rs 58,668 crore, to a marginal 7% in the electricity, gas and water supply segment, where it rose from Rs 146,554 crore to Rs 157,869 crore.
But for this moderate growth in electricity and related areas, the growth of infrastructure investments would have been substantially higher as the segment accounts for more than half the infrastructure investments. However, the more important cause for worry is that investments in the sector continue to decelerate sharply, despite the large power deficits and the growing role of gas in the energy segment. The new national income series numbers show that the growth of the segment has steadily decelerated from 34.6% to 31% and further to 15.9% and finally to 7.7% over in the last four years. Reversing the declining trend would call for a significant rework of policies to meet the needs of accelerated growth.
As for the communications sector, which has gained the most traction in recent years, the steady flow of investments has raised its share in total infrastructure investments from just a little above one-tenth to close to one-fifth in just three years, a historically remarkable feat for any sector of the economy.
Another sector which has been unaffected by the slowdown is the railways where investments has gone up from Rs 22,229 crore in 2007-08 to Rs 29,170 in 2008-09, a pick up of 31.2% which is a good ten percentage points higher than in the previous year. But despite this gain, the overall level of investments has gone up only marginally from 0.4% to 0.5% of the GDP over the last five years.
But the real laggard seems to be the transport sector, which includes road, rail and air transport. The 20.4% pickup in investments in the sector was a tad lower than the overall pickup in infrastructure investments. And trends over the last four years show that growth rates here has lagged that of the railways, despite its strategic role in transport, both in the domestic economy and the external sector. Consequently, its share in total infrastructure investments has slowed down from around a quarter in 2004-05 to less than one-fifth in the most recent year.
Surprisingly, another reason for optimism comes from an unexpected quarter, namely storage whose prospects seems to have steadily improved after a disastrous 2004-05 when the sector registered investment outflows. More recent numbers show that growth of investments in this sector has accelerated since then, picking up to a substantial 46.4% in 2008-09, which was more than double that of the total infrastructure investments and more than eleven times that in overall investments in the economy.