Policy paralysis impedes India’s trillion-dollar quest for infrastructure investments
A family waits for a bus while sitting on trees cut for the widening of the national highway on the outskirts of Aligarh on July 9, 2011, some 140 kms east of New Delhi . The National Highways Authority of India (NHAI) will award a record 7,300 kms of road building contracts this year worth about 12 billion USD as part of their road expansion plans. The new contracts will also help India meet its target of building 20 km of road each day as part of an overhaul to the infrastructure sector.
India needs a whopping $1 trillion investment to boost its lagging progress building roads, ports, bridges and office buildings. But the prime minister’s calls for cash are falling on deaf ears, thanks to his failures to push through economic reforms during his second term, reports the Economic Times.
On Monday, that policy paralysis may see some relief if Singh’s United Progressive Alliance succeeds in pushing through a long-awaited (and long decried) move to allow foreign investment in multi-brand retail outlets (like Wal-mart). I, for one, am not holding my breath.
Not only is the infrastructure funding not rolling in, investors are fleeing from companies that help build ports, utilities and roads like rats from a sinking ship, says ET.
The BSE’s Capital Goods Index is among the worst performers, losing 38% this year, when the benchmark equity index, the Sensex, is down 20%, the paper said. Meanwhile the flood of orders for industry leaders like Larsen & Toubro and state-owned Bharat Heavy Electricals (Bhel) has slowed to a trickle, and everybody is slashing their revenue and profit estimates.
So is it really policy paralysis, or the fact that these firms aren’t making as much money as expected?