Infrastructure deficit biggest hurdle for 'Make in India': S&P

The country's poor infrastructure is the "biggest hurdle" to government's flagship Make in India programme, S&P Global Ratings said on Tuesday.

PTI| Last Updated: Aug 02, 2016, 20:13 PM IST

Mumbai: The country's poor infrastructure is the "biggest hurdle" to government's flagship Make in India programme, S&P Global Ratings said on Tuesday.

"Infrastructure is the biggest hurdle to the ambitious Make in India programme of the government," S&P Global Ratings Credit Analyst Abhishek Dangra told reporters on a conference call.

The infrastructure deficit is costing up to 5 per cent of the GDP and an improvement will boost export competitiveness, according to some estimates.

However, he was quick to add that the export powerhouse of China also faces problems on the infrastructure front.

Every rupee invested in infrastructure development has a ripple effect and helps the GDP by Rs 2, he added.

The passage of the Goods and Services Tax, billed as the country's biggest indirect taxation reform, will give a fillip to the logistics and manufacturing sectors, he said.

Dangra said there are problems in the country's transportation sector with capacity constraints and underlined the need for better regulation.

"India's transportation infrastructure sector could significantly benefit from a stable regulatory environment that has an independent regulator, appropriate dispute- resolution mechanisms and supportive, comprehensive policies," he said.

Citing the case of the power sector, Dangra said better regulation has helped in a turnaround and we are looking to have a power surplus in 2016-17.

Even if the government leads with transportation spends, execution will be a key challenge, he said.

The government's limited finances will make it essential for the private sector to pitch in, the agency said in a note.

"The government is scaling up spending, but its heavy debt burden could derail its ambitions to improve public infrastructure," it said.

The global ratings agency said India Inc will see a turnaround in performance soon.

"The performance of Indian corporates is bottoming out. It will be a slow, U-shaped recovery for them," S&P Global Ratings Credit Analyst Geeta Chugh told reporters on a call.

Revenue growth is expected to move up in the next 2-3 years, the agency said, adding that this will be possible largely on increased government spending and the consequent increase in domestic economy.