Fin Statement

Overview

India’s economy is big and getting bigger.PricewaterhouseCoopers estimatesthat India will become the world’s thirdlargest economy by 2050. Liberalisation ofgovernment regulations and a deliberatestrategy on the part of the IndianGovernment to promote infrastructurespells opportunity for E&C companies.Nearly all of the infrastructure sectorspresent excellent opportunities, with roadsand highways, ports and airports, railwaysand power standing out as particularbright spots, with staggering sums of

investment planned. Public privatepartnerships (PPPs) are gaining inimportance, and are benefiting fromgovernment support – targeted PPPparticipation is US$150 billion. Companiesexperienced in structuring these types ofdeals should be able to use their expertiseto good effect in the Indian marketplace.

With the economy going into a tailspin, infrastructure has once again become the engine expected to pull India out of the woods. In June, just after it transpired that India's growth rate the previous financial year was the lowest in nine years, Prime Minister Manmohan Singh talked about how a big push for infrastructure could increase investment. Progress is being made, albeit tortuously. In the final analysis, infrastructure could indeed turn out to be the engine of India's resurgence

Road Blocks

The inherent nature of the infrastructure business is crucially linked to the policy framework. Infrastructure companies are largely dependent on the government for timely execution, and long delays have a bearing on project viability given the high cost of debt. "Interest rates are currently over 14 per cent making it difficult to access debt. To remain competitive, it is felt that interest rates should fall below 10 per cent.

There is a need to improve the investment climate by speeding up land acquisitions, evolving a streamlined process for environmental clearances and ensuring fuel supply to power plants, according to analysts. Once there is...