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Public or Private Spending: What’s Driving Infrastructure Growth?

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Introduction

We have analyzed the performance and growth rate of some segments of the infrastructure sector in India. We will now look at a snapshot of new projects being awarded to the infrastructure and related sectors. The chart below shows the number of new projects that were awarded in fiscal 2014 and fiscal 2015. The Indian fiscal year goes from April to March. For comparative purposes, we have categorized the projects into three categories: private, public, and PPP (public private partnership). PPP is a mechanism where the government shares the risks and responsibilities along with the private investor.

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Private sector

The chart above shows the private sector is lagging as compared to others regarding projects awarded. The public sector projects far outnumber both the private and PPP projects. Private sector projects, however, rose in 2015 as compared to in fiscal 2014. In fiscal 2015, the number of projects awarded through the public sector was 180, whereas the private and PPP projects were only 53 and 29, respectively. The public sector project cost was more than eight times that of the PPP in fiscal 2014. The difference has, however, narrowed marginally in fiscal 2015. Thus, the slow growth in the infrastructure sectors can also be attributed to the lack of investment from private players.

India-focused mutual funds

India-focused mutual funds like the Franklin India Growth Fund (FIGZX) and the Eaton Vance Greater India Fund – Class A (ETGIX) have some exposure to the Indian infrastructure sector. FIGZX holds stocks of infrastructure companies like Larsen & Toubro, Coal India, and Bharat Petroleum. The top ten holdings of the ETGIX constitute large-cap banking companies like the ICICI Bank (IBN). The funds also invest heavily in the technology sectors (INFY) (WIT).

To know more about mutual funds, visit our Mutual Fund page.

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