India Plans New Ports, More Highways in Push to Boost Growth

India will build two new ports and add more roads to remove infrastructure bottlenecks that hamper growth in Asia’s third-largest economy.

The new ports will be set up in the southern state of Andhra Pradesh and West Bengal in eastern India that will add capacity of 100 million tonnes, Finance Minister Palaniappan Chidambaram said in his annual budget speech in parliament today. The government will also award 3,000 kilometers (1,864-miles) of road projects in the first half of the year starting April 1, he said.

Builders of highways and ports will be allowed to raise as much as 500 billion rupees ($9.2 billion) selling tax-free bonds to help pay for projects next year, he said. Prime Minister Manmohan Singh’s government is seeking to boost infrastructure investments as economic growth is forecast to slow to the lowest level in a decade.

Road construction “faces challenges not envisaged earlier, including financial stress, enhanced construction risk and contract management issues,” Chidambaram said. “The growth rate of an economy is correlated with investment rate.”

GMR Infrastructure Ltd. and GVK Power & Infrastructure Ltd. have sought to quit some road projects citing delays, while state-owned National Highways Authority of India has said land acquisition delays and difficulty in raising loans were affecting construction.

GMR fell as much as 2 percent and changed hands at 18.2 rupees, down 1.6 percent, at 2:35 p.m. in Mumbai trading. GVK dropped as much as 5 percent, while Larsen & Toubro Ltd., the nation’s biggest builder of airports and power networks, declined 3.5 percent.

National Highways Authority and other agencies will raise about 250 billion rupees via tax-free bonds in the year ending March 31, Chidambaram said. The government will also set up a regulator for roads, he said.

India’s gross domestic product will rise 5 percent in the 12 months through March 2013, below last year’s 6.2 percent and the least since 4 percent in 2002-2003, the Central Statistical Office said in a statement earlier this month.