Poor infrastructure may stalls India's growth
India's inadequate infrastructure is a major roadblock to the country's target of achieving a 9-9.5 per cent annual growth in 2012-2017, according to Standard & Poor's Ratings Services.
In a report titled "Can India's Developing Infrastructure Keep Pace With Economic Growth?", it said the Indian government has stepped up infrastructure spending in recent years. Nevertheless, the slow pace of reforms and a lack of long-term funding options constrain the sector's growth.
"An immediate consequence of increasing urbanization in India (BBB-/Stable/A-3) in recent years has been manifold growth in demand for infrastructure. Such demand supports our stable outlook for the sector," said Standard & Poor's credit analyst Rajiv Vishwanathan.
"We expect the demand to keep increasing in step with growth in the Indian economy. The country's power deficit is fueling demand for energy projects, while rapid industrialisation and urbanisation are creating an urgent need for efficient road and rail connectivity and other improvements in infrastructure."
"We believe reforms to create a robust framework with transparent policies for project execution and funding will be critical to keep up the pace of infrastructure development in India," said Mr. Vishwanathan. "Constraints in securing clearances, land rights, and long-term funding could cause companies to fall short of their targets."
The twelfth five-year plan focuses on removing some of these roadblocks and creating a sustainable framework for private-sector participation. Nevertheless, the fate of the infrastructure sector over the next few years will depend on the ability of India's leaders to execute these plans.
