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Asia-PacificSeptember 3 2006

The road to sustained economic growth

India’s government has recognised the importance of tackling the country’s infrastructure deficit and is prepared to invest to help solve the problem. The results of this investment could provide excellent lending opportunities for banks. Kala Rao explains.
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That India’s infrastructure deficit is the single most important factor that constrains the growth of its economy is now well recognised. The government acknowledges that investment in both physical and social infrastructure needs to be greatly enhanced. Prime Minister Manmohan Singh heads an infrastructure committee that reviews progress in key projects such as the National Highway Development Programme, the Golden Quadrilateral Programme and the Urban Renewal Programme.

Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, told delegates at the annual Asian Development Bank (ADB) meetings in May that India needed to spend an additional 2.5% to 3% of gross domestic product on infrastructure, up from the current level of 4.5% of GDP, to be able to grow at 8% to 9%.

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