Consultant PricewaterhouseCoopers predict massive spending in next three years as economy continues to grow

India will invest more than $500bn in its infrastructure over the next three years.

Consultant, PricewaterhouseCoopers (PwC) said the construction gold rush will enhanced by a loosening of government regulations and a strategy to promote foreign direct investment (FDI).

PwC estimates that India will become the world's third largest economy by 2050 with growth expected to continue at 7-7.5%. Construction is the second-largest economic activity in India after agriculture.

Projected spending from now until 2012 is $167bn for electricity, $92bn in roads and $65bn in railways.

Global engineering and construction leader, PwC said speed was of the essence: “The opportunities to develop a significant business in India are extremely promising for construction companies, with roads, ports and airports, railways and power standing out as particular bright spots. Companies need to carefully select strong local partners, structure contracts sensibly to maximise tax benefits, where appropriate and take a long-term sustainable perspective.”

PwC said the government is simplifying the approval route process for public private partnerships (PPPs) and that targeted PPP participation is $150bn.

The firm recommends firms wanting to take part in PPPs take account of the following factors:

1) Do your homework and understand the local market including tax and regulatory issues before bidding on projects or setting up operations.

2) The typical PPP project design and preparation process is still largely technically-orientated, with limited appreciation of the overall financial and commercial risks involved.

3) The procurement process is highly prescriptive rather than participative.

4) Foreign firms are likely to need to identify promising local companies, then make a case for a profitable partnership, in order to invest in India sooner rather that later.

5) Companies need to take a long-term sustainable perspective.