Moody’s Investors Service said PPP model in India’s infrastructure needs to be developed further to attract more private investment for the sector that would help propel growth.
Stating that historical underinvestment and rapid economic growth are straining India’s existing infrastructure, Moody’s said adjustments to the public-private partnership (PPP) framework to align it more with more mature markets globally could help attract new private investment.
While the country’s PPP mechanism has seen reasonable success in some sectors over the last 20 years, the level of activity has been low in the last four fiscal years due to challenges, Moody’s V-P and Senior Analyst Abhishek Tyagi said.
“As such, India’s PPP framework will benefit if it is developed further to address key issues regarding improved risk allocation, the ability to renegotiate unpredictable factors in bid documents and a move away from project awards based on one metric such as estimated revenues,” Tyagi said.
Moody’s said India’s economy is set to grow at the fastest pace among major economies in 2016 and 2017 although GDP growth remains constrained by various factors, including inadequate infrastructure investment.
More developed PPP markets such as the UK, Canada and Australia, according to the rating agency, use both availability-payment and demand risk models and relatively standardised bid documents — features that could address some of the bottlenecks faced by the Indian framework.
