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.
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]
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]
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