Infra development to boost Indian economy: Moody’s

India's infrastructure development will continue to benefit the country's economy while headwinds for boosting non-agricultural employment remain strong, according to the latest report by Moody’s Ratings.

The ongoing development of infrastructure will continue to help improve the business environment, attract private sector investment, and create jobs in higher paying sectors, the credit rating agency says in a report.

However, challenges such as low participation in higher education and gender gap in education attainment remain for boosting employment in non-agricultural sectors, as per the report.

In addition to the growth opportunities for the infrastructure sectors, construction-related sectors, such as steel and cement producers, will continue to benefit from the development of railways, highways, ports and airports, says Moody’s.

An accompanying higher demand for transportation services will benefit transportation related sectors, such as automotive manufacturing, airlines, and ride-hailing services.

India’s physical and digital infrastructure has improved markedly, largely because of government and private sector capital spending, the report says.

“Over the past decade, there have been significant improvements in India’s infrastructure, such as railways, roads, airports and digital infrastructure, largely because of increased government spending and private sector investment. The fast advancement of digital infrastructure in recent years, particularly the establishment of a digital public infrastructure, differentiates India from many of its emerging market peers. As a result, the country’s ranking in the World Bank's Logistics Performance Index has risen to 38 out of 139 countries, from 54 out of 160 10 years ago,” says Moody’s.

In terms of physical infrastructure, India has achieved significant growth over the past decade. For example, India now has the second largest road network in the world, only behind the US. There has also been a remarkable increase in airport passenger handling capacity in the past five years. According to OAG, an aviation consultant, India has recently leapfrogged Brazil and Indonesia to become the third largest domestic aviation market, behind only China and the US. The robust growth in passenger traffic in India has been underpinned by strong underlying demand from a growing middle class as well as supportive government policies, such as the Ude Desh ka Aam Naagrik (UDAN) regime introduced in 2016 to promote regional aviation connectivity.

However, per capita travel or consumption stats for the country remains lower compared with many of its emerging market peers, the report says. This is partially attributable to land size difference among the countries.

“The density of the infrastructure build-out, as measured by the railway track or road length per 1,000 kilometers, suggests a higher density for India than many of its emerging market peers. For example, India's total road network density and railway route density are 2,130 km/1,000 km and 23 km/1,000 km, respectively, higher than China's 570 km/1,000 km and 12 km/1,000 km,” the report shows.