Estimation of Infrastructure Investment Needs in the South Asia Region
A number of efforts have been made to provide bottom-up engineering estimates of the one-time cost of reaching specific infrastructure goals, such as for the water and sanitation sector. Yet, there have been no regional efforts to use a top-down approach to estimate annual investment needs based on macro-economic analysis. The information currently available on South Asia’s infrastructure investment needs was derived by Fay & Yepes (2003). Therefore, following that approach, top-down estimates for South Asia are obtained based on historic relationships between national income, population and demand for infrastructure, combined with macro forecasts of economic and demographic growth. These estimatessuggest that a 7.5% GDP growth would result in increased demand for infrastructure services that in turn would require investment amounting to about 5% of GDP. In addition, a further 2% of GDP would be required for capital replacement amounting to over 7.5% of GDP in all. About two thirds of these expenditure requirements are associated with the roads and energy sectors alone. The corresponding new annual investment requirement of US$62 billion (2004 prices) implies more than trebling current investment levels. In addition, a further US$25 billion would be needed for capital replacement of infrastructure, amounting to an overall expenditure requirement of US$88 billion per year. This is as the investment needed to meet growing demand and maintain the existing capital stock. India amounts to nearly US$70 billion per annum or 80 percent of the region’s total investment. Comparing the estimated needs of US$88 billion with recent estimated levels of actual investment in infrastructure of around US$28 billion, suggests an annual financing gap of about US$60 billion.
Estimation of Infrastructure Investment Needs in the South Asia Region (132 KB PDF)
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