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Budget announcements positive for infra in long term: Fitch

Says new govt has made new long-term capital investment cycle as a policy focus

Press Trust of India  |  Mumbai 

The country's sector will get a huge boost from the multitude budgetary proposals, especially those on easing the funding for the sector, ratings agency said today.

"The new Indian government reasserted one of its core economic priorities to address the country's deficit to get multi-year boost," it said in a note today.

The agency said through the budget, the new government has made a commitment to carry forward the previous Manmohan Singh-led regime's efforts to clear the infra backlog.

It singled out the move to allow banks to raise long-term bonds for lending to longer gestation projects, and making it more attractive by giving concessions on the mandatory bond holdings and cash reserve requirements, as one of the biggest positives.

"It is the measures to ease funding that are particularly noteworthy and will be critical for driving the new investment cycle," it said.

said the new government led by has made new long-term capital investment cycle as a policy focus, which means fiscal and regulatory policy changes should be supportive of corporates in the infrastructure, construction, and real estate industries.

However, these positives will not play out so much in the short term and are applicable only in the medium to long term, it said.

Apart from Rs 600 billion in direct investments, special economic zones, new ports and subway projects, the presented by Finance Minister Arun Jaitley also included major announcements on urban and road building, it said.

Additionally, measures on the REIT (real estate investment trusts) will also be supportive to the sector, while opening up the construction sector for greater foreign investor play.

On the power sector, the agency said the extension of tax benefits for generating companies by three years will support their profits.

The plans to rationalise and improve coal supplies for power plants are also critical for improving productivity, it added.

It can be noted that is estimated to require over $1 trillion in investments during the 12th Five-Year Plan period ending 2017. The sector has, however, suffered in the recent past due to host of reasons, including difficulties in getting project clearances, some judicial interventions and also higher interest rates.

First Published: Mon, July 14 2014. 15:42 IST
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