China and India are spending an unprecedented $1.5 trillion on infrastructure projects in the next five years, approaching the level of US infrastructure spending for the first time, according to investor reports which identify the full scale of expenditure for the first time. The comparison with the US, which spends $400 billion on infrastructure annually, is particularly striking given the big difference in national wealth. US gross domestic product in 2007 was $46 trillion compared to China’s $3.6 trillion and India’s $1.05 trillion. The scale of this spending in China and India, on everything from sea ports and railways to energy and water systems, is much larger than previously understood and opens up significant new opportunities for private investment and expertise from overseas. The surprise is that India is likely to offer better infrastructure investment opportunities than much-trumpeted, and still fast growing, China. This conclusion emerges from two new reports on infrastructure development in Asia’s two major emerging economies by the independent research firm Trusted Sources and Australia-based consultancy Urandaline. The reports offer the first comparative analysis of the impact, and scope for investment, of infrastructure modernization in China and India. Larry Brainard, chief economist at Trusted Sources, said, “Both countries are investing on a massive scale and this is creating attractive long-term investment opportunities, both in specific projects as well as in companies that are positioning themselves to meet the new demands for resources, expertise and technology. To sustain economic growth, both countries urgently need more and better infrastructure. Our reports highlight where investors will find the best opportunities and how the political landscape will shape potential returns from such ventures.” INDIA—PLAYING CATCH-UP, FAST India’s infrastructure is largely underdeveloped but the government in New Delhi is now making up for lost time. Almost $500 billion is budgeted for infrastructure spending in the Five Year Plan covering 2007-12, almost double the proportion of GDP earmarked in the previous plan. One third of this investment is now expected from private firms, up from 18% previously. Converting this plan into reality will test both the country’s political flexibility as well as the patience of potential private investment. India leads the major emerging economies in attracting private investment in infrastructure. The report “India Infrastructure: Playing Catch up” analyzes how this sets it apart from those economies in which infrastructure investment, other than ports, is dominated by state firms. CHINA—PLAYING THE BOOM For all the huge strides made since economic reform was launched 30 years ago, China still desperately needs improvements in its infrastructure. May’s earthquake disaster in Sichuan underlined the poverty and underdevelopment that characterize large parts of the country. Key sectors such as energy, water supply and railways lag far behind what is required both to meet consumer demand and to keep industry moving forward. The leadership in Beijing increasingly recognizes the need to expand and modernize infrastructure if China is to foster the economic growth it needs to maintain social stability. However, political constraints are evident as the government fights inflation and powerful interest groups seek to protect their turf. Much of the targeted infrastructure expendi