Reserve Bank of India: "infrastructure is crumbling"

Featured - August 28th, 2012
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India’s infrastructure may not be able to get back on its feet as investment in the sector crumbles to the ground, according to the Reserve Bank of India.

Investment in new infrastructure in industries such as power, telecom, roads, ports, airports, mining and steel production fell 46% in the year through March from 3.9 trillion rupees ($70 billion) to 2.1 trillion rupees. Planned investment in infrastructure projects for the year beginning in April plunged 52% from the previous year to 1 trillion rupees. The central bank added that the government’s target of $1 trillion in infrastructure investment by 2017 still seems far fetched, in part due to the private sector’s lack of interest and sufficient stimulus.

The sector is also hit by high levels of debt, exposing Indian banks to risks. Credit Suisse reported that infrastructure companies are piling up debts at an average annual growth rate of 40% from 993 billion rupees to 5.39 trillion rupees.

This comes after India experienced a massive blackout as three regional power grids collapsed, paralyzing immobilizing parts of the country for several hours. Prime Minister Manmohan Singh still has to act out his pledges to provide basic infrastructure in India in an attempt to revive his government’s political clout.