FCC

Stalled projects an inhibition to fresh private investments in infrastructure

2018-10-08

Stalled projects in the infrastructure sector has acted as a dampener for investor interest and risk appetite. According a report, this has consequently reduced private investment in the past 10 years. Private investment in infrastructure was estimated at Rs 20 trillion between FY08 and FY2017, which has hugely affected several sectors. According to reports, revival of private investment has become essential to sustain the share of infrastructure funding at about six per cent of GDP over the medium-to-long term. There is reportedly a need for resolving stressed assets, new public-private partnership (PPP) frameworks and measures to strengthen investment sources.

However, since then, risks surfaced exposing a chasm in the PPP model, and resulted in increased stalled projects and stressed debt. This affected risk appetite in the private sector.

Areas such as urban infrastructure and railways have been unable to attract private investment, notwithstanding their vast potential. Spending on infrastructure saw a decline from seven per cent of GDP during 2008-12 to nearly 5.8 per cent between 2013 and 2017. According to the report, there can be further decline if private investments are not encouraged. Share of private investments in infrastructure projects has hit a decade low of around 25 per cent in FY18.

While the highway sector has witnessed a boost in PPPs, and some respite for the renewables sector, investments in other infrastructure segments have continued to be stagnant.

There will be a positive impact on economic growth, productivity and competitiveness due to infrastructure investments. But according to reports, it is important to fasten India?s infrastructure investment to about six per cent of GDP over a medium-to-long-term. A revival of PPPs in infrastructure will reportedly require redrawing of the PPP framework in double-quick time and providing opportunities for private investments.