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India’s infrastructure deficit too large to eliminate soon: S&P

31 Jul 2018 Evaluate

Global rating agency Standard and Poor's (S&P) has said that India's infrastructure deficit is simply too large to eliminate any time soon. It also said that infrastructure takes time to build, and perhaps more so in India than for many other countries. It also noted that India is making progress at scaling up its infrastructure, but still has a long way to go before it can close the sizable deficit between supply and demand. It added that the Indian government estimates around $4.5 trillion worth of investments are required till 2040 to develop infrastructure to improve economic growth and community well being.

In an article titled 'India's Infrastructure Marathon: Why Steady Growth Can't Close The Supply Gap', S&P has said that project delays and cost overruns are attributable to complex land acquisitions and environmental issues and in all democracies, societal considerations play a part, too. It stated that the country's progress at scaling up its infrastructure is shown in its decreasing power deficits, high passenger growth for airports, rising renewable capacity, and large metro train projects in progress. It added that the government is leading the buildup in view of growing urbanization.

The rating agency believed that the power sector is moving towards equilibrium in demand and supply from a deficit situation. However, it said that fortunes will vary for thermal and renewables. It pointed out that the infrastructure sector has high correlation with the overall economic environment. It noted that macroeconomic roadblocks could strain the government's budget or reduce project returns for the private sector. It mentioned that these risks include currency weakness, global trade protectionism, and rising inflationary strains that could push up interest rates. Elections scheduled for 2019 could also fuel political and policy uncertainty.

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