Moody’s: India’s PPP model to boost infrastructure investment

Ministry of Urban Development approves investment of 1.24 lakh cr for urban infrastructure development

Moody’s Investors Service says that enhancement of India’s (Baa3 positive) public-private partnership (PPP) model could help attract more private sector investment towards infrastructure projects, and thus help address the country’s very large infrastructure needs.

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 investments.

“Historical underinvestment and rapid economic growth are straining India’s existing infrastructure,” says Abhishek Tyagi, a Moody’s Vice President and Senior Analyst. “While the country’s PPP model has seen reasonable success in some sectors over the last 20 years, PPP activity has been low in the last four fiscal years due to challenges with the PPP model.”

“As such, India’s PPP framework will benefit if it is developed further to address key issues regarding (1) improved risk allocation; (2) the ability to renegotiate unpredictable factors in the bid documents; and (3) a move away from project awards based on one metric, such as estimated revenues,” says Tyagi.

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