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The huge gap in India and China's infra investments
Jun 23, 2015

High debt levels are the cause of many a company's demise. But what happens when they are crucial for growth of an economy? This is the situation that India finds itself in. Large Indian infra firms are not able to quickly pay down their debt. Thus, they are in no position to make the huge investments needed to boost growth. The government too is unable to come to the rescue in a big way. This is because it has committed to bridging its fiscal deficit. If the private sector doesn't start the process of fixed asset creation, India's economy will languish. We have good reasons to remain skeptical.

The chart shows just how far we have to go. If the Modi government is serious about bringing about a huge boom in infrastructure, it will have to find a solution to the debt woes of India's private sector. To achieve high levels of growth, fixed asset creation is a must. The scale of investments needed is a multiple of today's levels. Only a financially healthy private sector, along with strong support from the government, can achieve this we believe.

Source: Financial Times, Haver Analytics, IMF.
*PPP = Purchasing Power Parity

This Chart Of The Day was published in The 5 Minute WrapUp - Did anyone predict that these stocks would be 'Multi-losers'?

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