Govt targets transport and power to revive economy

June 7, 2012

The government on Wednesday vowed to push ahead with major transport and power projects in the current financial year, buoying stocks in infrastructure companies with an attempt to inject some life into the flagging economy.

Prime Minister Manmohan Singh said India aims to award 9,500 kms of road projects in the fiscal year to end-March 2013. His government also plans to commission three new airports, he said.

However, experts remained unconvinced the government’s latest move would revive economic growth as little was done to change conditions on the ground that have slowed development, such as land acquisition and environmental clearances.

Wednesday’s meeting, chaired by Singh, came after the country’s economic growth slumped to its lowest level in nine years in the first three months of 2012, leading to sharp criticism of his economic management.

Slow decision making in the government in the wake of a slew of corruption scandals is often held responsible for choking growth and drive to become an industrial nation.

“We as a government are committed to taking the necessary measures to reverse the present situation and revive and revitalize India’s growth story,” Singh told his ministers.

“We are aware that we have to act on multiple fronts to achieve this and we will indeed do all that is required of us.”

India faces the challenge of building infrastructure almost from scratch and to grow at a faster clip without stoking inflation. The government has penciled in an investment of about USD 1 trillion in the sector over next five years.

“In the short term, development of infrastructure will boost investment rates across the economy. In the long run, it will remove the supply constraints that affect economic activity in agriculture, industry and trade,” he said.

Infrastructure stocks such as GMR Infrastructure surged on Wednesday ahead of the meeting on hopes the government would help kickstart projects.

” It is good that the prime minister has started looking at the infrastructure sector,” said Sanjay Reddy, vice chairman of GVK Power and Infrastructure, a conglomerate with interests in energy, airports, hotels and transportation.

“But the devil is in the details and we will need to wait and see what happens over the coming weeks,” he added.

Singh has had such meetings in the past, but they did little to remove investment bottlenecks. Doubts remain whether the latest exercise will have any material impact.

SOURCE:http://www.moneycontrol.com