RBI

RBI urges govt to fast-track infra projects

23 August, 2012

The hopes of Finance Minister P Chidambaram to revive the investment climate in the Indian economy received a reality check from the Reserve Bank of India. The central bank has called upon the government to kick-start major initiatives in the infra sector. Quick, time-bound decisions under a transparent framework is the need of the hour and not necessarily quick clearances in projects, the central bank said in its annual report for 2011-12.

New investments in the country have slowed down substantially, while the existing investments are at risk with elongated gestations and input supply shortages affects on-going projects, the apex bank said.

According to the central bank, the total fixed investment by large firms in new projects, which were sanctioned financial assistance during 2011- 12, dropped by 46 per cent to about Rs 2.1 trillion from Rs 3.9 trillion a year ago, led by infrastructure and metals.

Power and telecom, the other two troubled sectors, has brought down the envisaged investment by 52 per cent to Rs 1 trillion in the previous year. The central bank warned that “Investment in telecom sector has dried up, while that in road, ports and airports has also decelerated sharply’’.

Investments in infrastructure are considered as a proxy for investment climate in the country. More than half of the envisaged corporate fixed investment in large projects has been coming from infrastructure since 2008-09. Its share, said the central bank, has dropped to 48.6 per cent in 2011-12 from 54.8 per cent in 2010-11 creating a ripple effect on the economy.

Lower coal production and supply shortages have emerged as a major bottleneck in infrastructure sector. The report said a large part of new capacity is facing coal linkage issues. The current state is the result of inadequate planning and coordination between power and coal sectors, as also slow execution of coal projects.

“There is a need to make doing business easy by adopting models like the one in Singapore, where multiple agencies/ministries sit together to quickly give its decision clearing investment projects,” it said.

It pointed out that India with proven coal reserves of 114 billion tonnes has to import about 70 million tonnes of coal.

On  infrastructure financing during the year 2011-12, gross bank credit to infrastructure outstanding as of April 2012 was Rs 6.2 trillion. However, the flow of bank credit to infrastructure has decelerated. Data on sector-wise gross deployment of bank credit shows that its year-on-year growth has declined to 14 per cent in 2011-12,  compared with 38 per cent in 2010-11.

(Edited by Prem Udayabhanu)


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RBI urges govt to fast-track infra projects

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