As per rating agency, though India is accelerating its infrastructure investment, yet it has a long way to go before it can close the sizeable deficit between supply and demand.
India’s infrastructure deficit is “too large”, said S&P Global Ratings, adding that the country will take time to close the sizeable deficit between supply and demand.
“India’s infrastructure deficit is simply too large to eliminate any time soon. Infrastructure takes time to build, and perhaps more so in India than for many other countries,” S&P Global Ratings credit analyst, Abhishek Dangra was quoted as saying.
In an article titled ‘India’s Infrastructure Marathon: Why Steady Growth Can’t Close The Supply Gap’, the global rating agency estimated Indian government will need to invest worth $4.5 trillion in the infrastructure sector till 2040.
As per it, though India is accelerating its infrastructure investment, yet it has a long way to go before it can close the sizeable deficit between supply and demand.
“Project delays and cost overruns are attributable to complex land acquisitions and environmental issues. And in all democracies, societal considerations play a part, too,” S&P said.
The reports says India's decreasing power deficits, high passenger growth for airports, rising renewable capacity, and large metro train projects in progress are a vindication of its increased infrastructure investment.
“We believe the power sector is moving towards equilibrium in demand and supply from a deficit situation. However, fortunes will vary for thermal and renewables,” Dangra said.
“No more new thermal power capacity is required until 2027, other than for projects already under construction; while renewables will continue their strong growth based on competitive tariffs,” he added.
The agency said the infrastructure sector has direct relation with the overall economic environment.
There might be risks to the investment, says agency, which 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, S&P said.