Sunil Jain: Capital stuff

PERSPECTIVES

For those worrying about whether India's infrastructure will be the big bottleneck to growth, investment firm JM Morgan Stanley's of the view it's about to take off. According to the firm, India's infrastructure spending is around $28.4 bn today or around 3.6 per cent of GDP and this will pick up to over $50 bn by 2008-09, that is to just under 5 per cent of GDP.

Naturally then, this will have a huge impact on the order books of capital goods firms such as BHEL, ABB, and Siemens, and the report projects increasingly attractive P/E ratios for these firms. If the investment does materialise though, it will be far greater than official estimates put out.

At the NYSE a couple of years ago, Prime Minister Manmohan Singh said the country would invest at least $150 bn in infrastructure over the next decade! To make things more confusing, the Economic Survey talked of the infrastructure sector being able to absorb $150 bn of FDI alone over the next five years!