Kotak Report Finds Turbulence on Private Investments on Large Infra Projects

Private investment in the country may decline given the paucity of large industrial or infrastructure projects for the private sector, a Kotak report said on Monday. This despite a sharp cut in corporate tax announced by the government last month.

The report cited a number of reasons for this such as weak balance sheets and high leverage of most large infrastructure companies, weak commodity cycles and unfavorable policy framework on ownership and operatorship of basic infrastructure assets.

"The government has finally adopted a big 'bazooka' approach to kick-start private investment with a significant cut in the corporate tax rate, but it may have to address other factors of production to encourage greater private sector investment," Kotak said in the report.

Besides, Kotak expects the government to be the primary builder of basic infrastructure in the foreseeable future as current ownership and pricing policies preclude larger private sector investment in the areas of power distribution, railways and urban infrastructure (electricity, transportation and water).

While noting that India has made commendable progress on several 'ease of doing business' parameters over the past few years, the report stressed on the fact that the country still scores quite poorly in several areas related to approvals and contracts.