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Infra spending by States must rise: Crisil

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Country-wide spending required over the next decade is about ₹235 lakh crore

With the ‘centre’ of gravity of infrastructure spending now shifting to the States, the fiscal squeeze, as seen in persistent revenue deficits, debt surge and high fiscal deficits in several large States, could potentially limit the expansion of their investment capacity in the coming years, according to Crisil.

Infrastructure investments by States need to rise to ₹110 lakh crore over the next decade (fiscal 2021-2030) — or 3.5 times an estimated ₹32 lakh crore in the current decade — if India is to achieve its mammoth infrastructure build-out targets, rating agency Crisil Ltd. cautioned in its Infrastructure Year Book 2019 released on Tuesday.

“States need to address these constraints urgently if India is to have world-class infrastructure. Without cardinal contribution from the States, it will be tough for India’s GDP growth to rebound and sustain above 7.5%, and infrastructure spending to increase to 6-6.2% of GDP in the coming decade,” it said.

Other impediments include weak institutional capacity reflected in mounting losses and operational deficiencies of utilities in power, water and urban transport sectors. Country-wide infrastructure spending required over the next decade would be about ₹235 lakh crore.

States already account for 41% of the overall infrastructure spending of ₹77 lakh crore this decade. Five sectors — transport, irrigation, energy, urban and housing, and water and sanitation — accounted for two-thirds of States’ spending. Some of these sectors, which come under the purview of States, have burgeoning infrastructure deficits and will need big investment leaps to plug the gaps.

“With private investments tepid in recent years, and fiscal limitations on central spending, States have been keeping public spending going. They will need to strengthen fiscal health and build institutional capacity to sustain far higher levels of capex.” said Sameer Bhatia, president, Crisil Infrastructure Advisory.

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Printable version | Dec 6, 2019 12:31:31 AM | https://www.thehindu.com/business/infra-spending-by-states-must-rise-crisil/article30090145.ece

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