The infrastructure development in the country is being hit hard by a slow pace of reforms and limited long-term funding options and this trend can deter the economic growth, rating agency Standard & Poor's has warned.
In a report analysing the key factors hindering the infrastructure growth, S&P has said that the government has stepped up infrastructure spending in recent years, but a slow pace of reforms and a lack of long-term funding options were constraining the sector'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 2012-17,” said the report, titled “Can India's developing infrastructure keep pace with economic growth?”
“An immediate consequence of increasing urbanisation in India in recent years has been manifold growth in demand for infrastructure,” S&P's credit analyst Rajiv Vishwanathan said adding that demand was likely to keep increasing in step with growth in the Indian economy.
In order to keep up the pace of infrastructure development, reforms are necessary to create a robust framework with transparent policies for project execution and funding, S&P said.
“Constraints in securing clearances, land rights, and long-term funding could cause companies to fall short of their targets,” Vishwanathan added.
The country's power deficit is fuelling demand for energy projects, while rapid industrialisation and urbanisation are creating an urgent need for efficient road and rail network and other improvements in infrastructure, Mr. Vishwanathan added.
The XII Plan focuses on removing some of these roadblocks and creating a sustainable frameworkfor private sector participation.
“The fate of the infrastructure sector over the next few years will depend on the ability of India's leaders to execute these plans,” the report said.