India needs around Rs.2,000 billion ($45.8 billion) in annual investment in infrastructure with private participation to sustain the 7.0 percent GDP growth, a leading industry lobby said Sunday.

"The core sector must grow as fast as, if not faster than, the GDP growth to sustain the economy and prevent capacity constraints from coming up," said the Confederation of Indian Industry (CII) in a statement based on inputs from its national council members.

At a meeting held in Chennai to review the state of economy, the members felt that "a minimum of 7.0 percent of GDP has to go into gross capital formation in infrastructure. This translates into Rs.2 trillion a year of investment".

The CII said the private sector can at best provide 20-30 percent of the desired investment, with the government providing the rest.

It is estimated that currently only half of the desired investment is being made in core sectors like power generation, roads, production of crude, cement and coal.

While clearly upbeat on growth in all areas of the economy right from manufacturing to services and agriculture, the CII felt there was a need for larger investment in core sectors.

On the positive side, the CII pointed out that the Indian economy had become resilient to high global oil prices. The value added tax (VAT), introduced in April, was getting higher collections.

Further, "the inflation was moderate. Non-food credit was rising by more than 20 percent. The fiscal deficit was coming down and various agencies were all forecasting GDP growth rates higher than 7.0 percent for 2005-06".

To sustain this growth momentum, the CII called "for a higher growth rate in the core sector".

It has urged the "government to ensure on-the-ground implementation of many infrastructure projects like roads, ports, power, coal projects and airports. With enhanced investment in infrastructure, the current high rates of growth would be definitely sustained", said the statement.

To attract larger private participation, the CII said "a proper regulatory framework is important, one that is transparent, empowered, and independent".

The CII members are part of the government task force that is framing such a regulatory framework for all infrastructure sectors.

The CII, however, feels that another "task force should be set up to look into infrastructure development, fix physical targets and monitor the projects undertaken. An initiative like this is critical for the Indian economy".