Building Bridges: How Indian Companies Are Transforming Infrastructure Across the Developing World

By Jaya Prakash Pradhan December 5, 2009 685

Print Article

Type	Journal article
Title	“South-South Investment in Infrastructure: The Operation of Indian Firms in Developing Countries”
Author	Jaya Prakash Pradhan
Published	2009 · Foreign Trade Review, 43(4), pp. 3–31 · SAGE Publications
Coverage	Indian infrastructure investment in developing countries · 1970s–2007
Read	Article · PDF

This is a plain-language summary of “South-South Investment in Infrastructure: The Operation of Indian Firms in Developing Countries” (Pradhan, Foreign Trade Review, 2009).

In short:

Indian firms have become significant infrastructure builders across the developing world — investment grew from about $7 million in the 1970s to $1.07 billion by 2007, spread across 45 countries.
Their engagement evolved through three modes: project exports, then direct investment, and most recently resource-for-infrastructure swaps.
This “South-South” cooperation fills gaps that North-South investment often misses — including smaller contracts that Western firms overlook.

The infrastructure challenge

Developing countries need roads, power, ports, and telecommunications to grow — and the conventional sources of finance have been public budgets or investment from rich countries. This study documents a different and less-recognised source: Indian firms investing in the infrastructure of other developing nations. It’s a clear example of “South-South” cooperation, where one developing economy helps build another’s foundations.

From domestic builder to global one

India’s firms didn’t arrive abroad by accident. Through the 1960s, backed by government policy and investment in technical education, Indian companies built genuine engineering and construction capability at home — in power, railways, and heavy construction. By the 1970s they were ready to compete internationally, and the Gulf oil boom gave them their opening: as petrodollar-rich Middle Eastern states launched huge infrastructure programmes, Indian firms won contracts in Iraq, Kuwait, and Libya by offering solid engineering at competitive prices. A modest $18.8 million in overseas contracts in 1968–69 grew, over the following decades, into billions.

Three modes of engagement

The form that engagement took has deepened over time — from simply executing projects to owning operations to trading infrastructure for resources.

It began with project exports — Indian firms executing specific jobs on contract, building roads, dams, and power plants for a fee. From the 1990s, the model deepened into direct investment: rather than just completing projects and leaving, firms set up local subsidiaries and joint ventures to operate infrastructure, with companies like Tata Communications and Reliance Infocomm investing heavily in overseas telecom. And most recently came the most innovative form — resource-for-infrastructure swaps, in which Indian firms build infrastructure in exchange for access to natural resources. The paper’s example is ONGC Mittal Energy’s agreement to build railways and power plants in Nigeria in return for oil-exploration rights.

The footprint

The scale of this activity is substantial. Indian infrastructure investment in developing countries grew from roughly $7 million in the 1970s to about $1.07 billion by 2007, reaching 45 developing countries. By sector, telecommunications led at around 38% of investment, followed by construction at 29%, with the remainder spread across power, transport, and other areas. (These are figures as of 2007.)

Why it matters

South-South infrastructure cooperation carries distinctive benefits. Host countries get capable infrastructure at competitive prices; Indian firms gain new markets and experience; and both sides share a broadly similar development context, which can ease collaboration. Notably, Indian firms have often pursued smaller contracts that larger Western firms overlook — precisely the projects many developing countries most need. The paper’s central recommendation is a policy one: home and host governments should build a holistic framework — streamlining cross-border approvals, supporting South-South investment, and addressing payment security and contract enforcement — to channel this momentum toward genuine development.

Read the academic abstract

Since the 1990s, South-South investment flows have assumed considerable significance in economic relations among developing countries. Host developing countries increasingly see growing FDI from co-developing economies as a prospective source of financial capital, skills, and technologies useful for their development — yet there is a clear lack of recognition of southern investment’s potential to improve civil, social, and industrial infrastructure. A distinction can be drawn between two main forms in which developing-country firms participate in the infrastructure sector of co-developing countries: project exports (in areas such as transportation, communication, and energy) and direct-investment operations that provide infrastructure services to end users. India is a classic example of South-South investment in infrastructure, with Indian firms consistently expanding both their project exports and infrastructure-related FDI. Given their growing size, the study calls for a holistic policy framework — from both home and host developing countries — to enhance the potential of such investment for infrastructure development.

Cite this article

Pradhan, J. P. (2009). South-South investment in infrastructure: The operation of Indian firms in developing countries. Foreign Trade Review, 43(4), 3–31. https://doi.org/10.1177/0015732515090401

Read the article → · PDF →