Funds could pump $25bn a year in India’s infrastructure, Ambit Capital says

The country's economy is forecast to grow by 6.8 per cent in 2022

Mumbai's skyline. India's economy is forecast to grow by 6.8 per cent in 2022. AP

Global pension and sovereign wealth funds could invest around $25bn a year in Indian infrastructure, according to investment bank Ambit Capital.

Funds appreciate the better regulatory framework, growth in India and commitment to the climate change requirement for the net-zero carbon policy, Rahul Mody, managing director and co-head of investment banking at Ambit, said in a Bloomberg Television interview on Friday.

“Domestic investors, institutional investors and high net worth individuals and family offices will continue to invest, but I would say a majority of these investments will come from global funds."

Mody cited investment infrastructure trusts, known as InvITs, as a type of vehicle that has attracted global funds. Initiated by the government several years ago, InVITs offer tax incentives and concessions as well as a governance and capital structure that is robust, and restricts leverage, he said.

In terms of subsectors, roads and renewable energy have attracted the most capital, Mody said. Investors have also shown interest in telecommunication towers, digital infrastructure, data centres, fiber and power transmissions, he said. Hydrogen, energy storage and railways could see significant investment, Mody added.

India’s economy is forecast to grow by 6.8 per cent in 2022 and 6.1 per cent next year, after expanding 8.7 per cent in 2021, according to the International Monetary Fund.

The IMF has cut its growth forecast for 2023 and warned of a cost of living crisis as the global economy continues to be affected by the war in Ukraine, broadening inflation pressures and a slowdown in China.

The fund maintained its global economic estimate for this year at 3.2 per cent but downgraded next year's forecast to 2.7 per cent — 0.2 percentage points lower than its previous forecast.

This is the weakest growth profile since 2001, except for the 2008 global financial crisis and the acute phase of the Covid-19 pandemic, and reflects significant slowdowns for the largest economies, the fund said.

India's stock market rally continued on Friday after the Sensex rose to a record level the previous day, driven by technology and financial stocks, as Asia’s third-largest economy rebounds from the coronavirus pandemic.

Oil prices, which hit record levels this year amid the Ukraine conflict, have eased over the past few weeks due to demand concerns as China, the world’s top importer of crude, continues to enforce lockdowns in a number of cities to curb the spread of the pandemic.

India, the world’s third-largest crude importer, has boosted imports of discounted Russian crude.

The country is due to overtake China next year as the world's most populous country with more than 1.4 billion people, according to the UN.