Transfin.

16% of System-Level Corporate Debt Could Default Over Three Years, Project Completion Record Casts Doubts on Infrastructure Goals

India’s poor record of infrastructure management casts doubt on ambitious infrastructure plans. 16% of system-level corporate debt likely to default over three years, report says.

 

FUTURE

India’s poor record of infrastructure management casts doubt on ambitious infrastructure plans.

To See the Future, Look to the Past

If capital allocations are anything to go by, infrastructure spending is a top priority for the Government. In Budget 2020, ?1,70,000cr ($23.46bn), which is 15% of the entire budget for capital allocations, was reserved for infrastructure development.

 

Zeal notwithstanding, completing these infrastructure projects will be a major challenge. According to data released by the Ministry of Statistics and Programme Implementation (MoSPI) in a report titled ‘Project Implementation Status Report of Central Sector Projects Costing ?150cr and Above’ and analysed by a Livemint report, project completion isn’t one of India’s strong suits.

 

“[According to the last six years’ data], time and cost overruns have become routine features and these problems are most acute in four sectors that account for a bulk of infrastructure projects in the country: road transport and highways, power, railways, and petroleum.” [Livemint]

 

16% of system-level corporate debt likely to default over three years, report says.

Debt is a Time Bomb

According to a recent report by India Ratings & Research, at least ?10.52trn ($145.2bn) worth of corporate loans - around 16% of the system-level corporate debt - is likely to default over the next three years due to the prolonged slowdown in the economy. Further, around 25% of the vulnerable debt is likely to turn delinquent, resulting in additional ?2.54trn ($35.05bn) of debt. [BS]

FIN.

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