Infra spending by States must rise: Crisil

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News:The Credit rating agency CRISIL has released its Infrastructure Yearbook 2019.

Facts:

Key takeaways from the Yearbook:

  • CRISIL has said that states need to scale up investments to Rs 110 lakh crore over the next decade to achieve India’s massive infrastructure targets.
  • The country-wide infrastructure spending required will be Rs 235 lakh crore over the next decade and has called for average GDP growth of 7.5% and infrastructure spending of above 6% of GDP to help achieve infrastructure targets.
  • Currently,the cumulative investment in infrastructure by state government is Rs 31 lakh crore or 41% of the total expenditure by the Centre and private sector which stood at Rs 77 lakh crores.
  • The five sectors which accounted for two-thirds of the states spending are transport, irrigation, energy, urban & housing, and water & sanitation.

Categorisation of states:The Yearbook has bucketed states into three categories:

  • Frontrunner states such as Gujarat,Maharashtra and Karnataka has seen a slowdown in capital expenditure.These states need to attract private investments and find new ways to grow capital expenditure.
  • Middle of the pack states such as Haryana,Andhra Pradesh and Telangana can be growth leaders by sustaining their current spending.
  • Climbers states such as Rajasthan and UP which have been high spenders in recent years could be constrained by surging debt burden.

Constraints in infrastructure spending:CRISIL has identified key structural constraints to address for a sustained increase in spending which are:

  • fiscal deterioration
  • institutional weaknesses and 
  • inability to scale up commercial financing and public-private partnerships (PPPs).

Recommendations:CRISIL has recommended several measures to address the structural constraints which are 

  • expanding fiscal space by unlocking asset monetisation potential and moving to merit-based directed subsidies 
  • nurturing robust counter-party institutions that can own up infrastructure development (including driving viable PPPs) 
  • ironing out sectoral creases and rolling out policies that lift the investment momentum.

Additional information:

About CRISIL:

  • CRISIL stands for Credit Rating Information Services of India Limited.It was the first credit rating agency set up in India in 1987.It is headquartered in Mumbai.
  • It provides an independent opinion and efficient solutions by performing data analysis and research.