The Hindu Business Line : `Low infrastructure spending

DR J MARK MOBIUS, the well-known portfolio manager at Templeton, has in a commentary underscored the country's low infrastructure expenditure, branding it the "single most important macro constraint" on the economy.

India is currently spending a small fraction compared to what is required for a nation of its caliber, the manager in charge of Templeton India Growth Fund has lamented while outlining his growth outlook for the year.

The Indian government has a limited scope for advocating a major increase in infrastructure spending, given the country's high level of deficit, Dr Mobius has pointed out. He, however, has also underlined the fact that infrastructure seems to be progressively gaining importance in the country, thanks to planners who appear to be determined to accelerate public investments in infrastructure.

The current plan is to spend an additional $ 5 billion per annum for the next three to four years - "still a small amount", but one that would provide some impetus to a sustainable recovery in the overall investment cycle. "While industrial growth is likely to be higher than expected, agriculture growth is expected to be lower. Strong private consumption and strong export growth has ensured sustained growth in sectors such as automobiles, durables, chemicals and base metals", the commentary has mentioned.

But while there is a relatively healthy export growth supporting manufacturing output, a weaker-than-expected agriculture growth may well offset the upside, it is felt.

Dr Mobius has also referred to the winter crop, which seems to have suffered - adding to the woes stemming from the poor summer crop. The main reason for this development is inadequate rainfall during the monsoon, it is felt.

In an assessment of FDI flows into India, Templeton has noted that inflows had remained flat at $ 4.6 billion in fiscal 2003-04. However, at 0.9 per cent of GDP, it lags China's 4.2 per cent considerably. The government's capacity to liberalise FDI limits in certain cases has been constrained by pressure from some political quarters.

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