India Growth Boost Via Road Construction Depends on Lower Rates

  • Highway network to be expanded to 200,000 kilometers by Dec.
  • Government planning to monetize 101 toll roads across India

India’s plan to sustain its position as the world’s fastest-growing major economy hinges on availability of cheaper funds for the road and port builders, the country’s transport minister Nitin Gadkari said.

“Interest rate to infrastructure projects is 11 percent and it is not good for the sector,” Gadkari said at a Bloomberg event in Mumbai on Monday. “The ideal interest rate to infrastructure sector should be less than seven percent.”

Prime Minister Narendra Modi’s administration is stepping up construction of roads, ports and airports as part of plans to fulfill his 2014 election pledge of boosting economic growth and improving ease of doing business. High interest rates at home makes borrowing overseas cheaper at a time when government plans to triple spending on the sector compared to the average of the past three years.

The roads ministry is aiming to boost network of highways covering the vast South Asian nation to about 200,000 kilometers (124,000 miles) by the end of December, Gadkari said. Eyeing overseas investors, the government will monetize 101 toll roads, he added.

Road construction is key to creating jobs crucial for Modi ahead of key state polls next year and a general election that’s due by 2019. Only about 55-60 percent of India’s roads are paved, while more than a third of China’s 4.5 million kilometers (2.8 million miles) are fully built, based on Bloomberg Intelligence analysis.

India’s gross domestic product is expanding at a more than 7 percent pace and Gadkari said boosting country’s infrastructure, whose quality is ranked below that of China and Indonesia, is key to improving economic sentiment. The government aims to build about 40 kilometers of roads a day in the year ending March 31, according to the roads ministry.

As many as 95 percent of stalled road projects are back on track now, the minister said. A project logjam had slowed the pace to about 3 kilometers when Modi’s government took office just over two years ago.

“It is my responsibility as minister to give them a big target and to ensure it is done,” Gadkari said, adding that he has to sometime coax reluctant officers to achieve them. “I tell them I am minister, you have to do it. You do or die.”

— With assistance by P R Sanjai, and Anto Antony

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