India is on the verge of witnessing a sustained growth in infrastructure buildup. With a slew of announcements in housing, road, port and airport development, we are seemingly on a path of sustained recovery in infrastructure construction in the country. As infrastructure plays a vital role in the Indian economy, many experts believe that in order to go to a double digit growth path in the future, investments in the infrastructure sector should be increased. Given Rs 2,140 bn earmarked for the infrastructure development, we believe this a step in the right direction. However, despite earmarking huge amount of sum each year, the state of infrastructure continues to remain dismal as execution issues (due to political and bureaucratic delays) continue to plague the sector. Even the tight monetary environment due to high inflationary expectations has stemmed the credit flow into the sector.
However, the slew of measures announced in the budget like raising the FII limit for investment in infrastructure bonds and lowering the with-holding tax for notified infra funds should ease the credit flow into the sector.