Scrambling for remedies as investors faith in India sagged,the government said last week it fast-tracked approval for a slew of infrastructure projects worth $28 billion: but the stroke of a pen in New Delhi will not be enough.
The government hopes that speeding up the launch of hundreds of new power plants,highways and oil exploration blocks will breathe new life into an economy that has fallen off its perch as an emerging market high-flier.
Growth in the latest quarter was the slowest since during the global financial crisis,and the rupee has tumbled ever deeper against the US dollar. Failing to get the projects off the ground would be another blow.
However,there is no evidence to suggest that these projects will somehow sidestep the obstacles that have hobbled construction for years from red tape and land acquisition battles to banks unwillingness to lend to a risk-prone sector.
The infrastructure sector is one of the biggest contributors to banks growing bad loans,with outstanding debt of about $120 billion,and tight liquidity conditions mean debt-laden companies will find it tough to raise fresh funds.
Anil Swarup,a senior official in the prime ministers office who heads a group that monitors and helps steer projects already cleared,said no companies had complained to his group of a lack of progress.
However,he accepted that a fast-tracked project still faced many hurdles,including wrangles over land acquisition and law-and-order problems at a state level. We cannot expect an overnight transformation, he said. In any project,there would be a number of issues and… until those are resolved,the project does not go on stream.
One beneficiary of last weeks project clearances by a cabinet panel was Essar Group. After a 5-year wait,Essar was finally promised environmental approval to develop two coal blocks that will feed a power plant in the state of Jharkhand.
The reaction of one company official,though,was lukewarm. The approval may have come through,but a timeline for when the company can actually start mining was still uncertain.
“Funding is linked to the environment clearance to the coal blocks,and banks will release funds once we have all the clearances. The announcement is a positive development,but we have got nothing in our hands,so we will progress on this once everything has been approved,” said the official.