Infrastructure Sector in India is in Tough Situation

Infrastructure Sector in India is in Tough Situation
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The infrastructure boom is considered to be a symbolic of growth. But over last few years in India, this segment is struggling. Large debts of the India’s big infrastructure companies is threatening the country’s ambitious infrastructure projects to improve the roads, electric grids and other public works.
According to reports the companies with big projects owe more than 3 lakh rupees (USD 48 billion). The total amount of debt for Indian infrastructure companies at more than 6 lakh Rupees is highest in more than a decade, affecting the overall economy.  Banks, fearing the loans won’t be repaid, are reluctant to lend to other companies.

However, the debt equity ratio, (total debt as a percentage of total equity has come down from 150 per cent in end 2013 to 124 per cent in September, 2014, according to various sources. The points of concern is the debt of Indian infrastructure companies  is rising and the private investment in Infrastructure has come down from the peak of nearly USD 70 billion in 2010 to a trickle in 2014.

High debt levels could limit India’s ability to help drive global growth at a time when China is slowing and many of the world’s economies are weak. Foreign portfolio investors have poured USD 42 billion into Indian stocks and bonds over the past year, leaving them vulnerable to cracks in the country’s economy.

In India, overall debt levels are relatively low. But the infrastructure sector struggling the most with its borrowing is also one that Prime Minister Narendra Modi is counting on to resurge  the economy and boost the country’s productivity. Instead, the companies are now focused on reducing their debt.

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