India's creaky infrastructure is often cited as a big hurdle to its growth potential. India's power sector faces annual losses of $27 billion by 2017 unless sweeping reforms are taken to tackle inefficient subsidies and other issues, the World Bank said on Tuesday.
The Narendra Modi government has made improvement of infrastructure one of its top priorities. P. Srinivas, executive director at Bank of Baroda, said the forthcoming budget would be keenly watched to know about the government's policies for this sector. Finance Minister Arun Jaitley will present the budget on July 10.
Mr Srinivas said availability of raw materials like coal and gas are one of the major issues for power producers. Other issues like mining and other approvals also need to come to "logical end so that actual activity can happen", he added. PSU banks are one of the biggest lenders to the power sector, especially to state electricity board distribution companies. (Watch video)
Infra Funding
For the infrastructure sector, funding also remains a big concern. "Infra sector has long-term funding requirement but banks have resources mostly for the short term. We generally don't give loans beyond 10 years," Mr Srinivas said.
His suggestion for overcoming infra funding woes: Either have term-lending institutions for infrastructure sector or banks get more flexibility to lend to the sector.
Mr Srinivas said faster government approvals in areas like forest clearances, land acquisition can infra projects avoid delays in projects and escalation in costs.
Manufacturing
Manufacturing sector has been a big drag on India's growth in the last two years. Revival of the manufacturing sector should also be a part of the budget agenda, says Mr Srinivas. Besides generating more jobs, manufacturing sector can also help in the growth of the services sector and micro, small and medium enterprises. "Positive steps like power, land at reasonable terms, tax concessions and faster permissions can help the manufacturing sector," he said.
Interest rate and inflation
High interest rates have also been blamed for the country's growth slowdown. "Interest rates depend on inflation control and as of now Inflation is being driven by food items. Even though we had a good monsoon last year and production went up it is not impacting food inflation in big way," he said.
Mr Srinivas attributed it hurdles in mobility of food stocks. The government should improve mobility of food stocks and sell surplus food grains, he said.
A reduction in subsidies can also help bring inflation lower, he said.
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