News: 'India infrastructure sector needs reforms'

(RTR 30/07/2006) New Delhi - India needs more reforms and lower taxes if the core infrastructure sector -- from energy to steel -- is to grow at more than 5 percent in 2006/07, the Federation of Indian Chambers of Commerce and Industry (FICCI) said on Sunday.

The infrastructure sector is key for Asia's third-largest economy to hit 10 percent growth, up from 8.4 percent in 2005/06.

Combined growth of six infrastructure sectors -- oil and gas, crude oil, electricity, coal, steel and cement -- was 4.9 percent in 2005/06.

The FICCI said higher core growth would also benefit the engineering and services sectors.

An FICCI survey of Indian business shows the oil and gas sector growing at 0.8-1.4 percent in 2006/07, versus a 1.4 percent fall in output in 2005/06.

Crude oil production should rise 0.5-1.2 percent in the year to March 2007, versus a 5.2 percent drop a year earlier, it said.

India imports about 70 percent of its fuel needs, and rising world oil prices will push up its import bill and put pressure on the rupee. Higher domestic output could help India trim imports, the federation said.

The FICCI said a new exploration and licensing policy (NELP) was yet to yield results and the government should introduce more liberal packages to boost domestic production.

The coal sector is projected to grow at 6.5-7 percent in 2006/07, up slightly from 6.4 percent a year earlier, the FICCI said, while electric power should grow 5.5-6 percent, up from 5.1 percent in 2005/06.

Steel output should rise 7-8 percent, up from 6.5 percent.