India’s infrastructure growth slowed to a three-year low of 4.2% in the fiscal year ending March, indicating that Prime Minister Narendra Modi faces a tough challenge to boost investment ahead of the general elections scheduled for early next year.
According to data released on Tuesday by the Ministry of Trade and Industry.
Modi, who is due to run for a second five-year term next year, has relaxed several rules and injected billions of dollars in public funds into the construction of roads, ports and airports to support economic growth and create jobs .
India on Sunday completed the electrification of all its villages 12 days ahead of a deadline set by Modi, which could give the ruling party a boost ahead of the 2019 general election.
Analysts, however, say higher borrowing costs and delays in official project approvals have hurt private investment.
Some 356 infrastructure projects, each costing 1.5 billion rupees or more, had been delayed for up to five years, resulting in a total cost overrun of 2.19 trillion rupees ($32.9 billion), according to government estimates.
Infrastructure production, which includes eight sectors such as coal, crude oil, natural gas, steel, cement and electricity, accounts for almost 40% of India’s industrial output.
Steel production growth slowed to 5.6% in the year ending March, from 10.7% the previous year. Cement production increased by 6.3% over the same period, compared to a decline of 1.2%, indicating a recovery in construction activity.
In March, infrastructure growth slowed to a three-month low of 4.1% from a year ago, according to government data.
Asia’s third-largest economy has been held back for years by a shortage of energy sources such as electricity, coal and transportation fuel, leaving industries to deal with blackouts and hospitals to rely on diesel generators as a backup power source.
The government plans to spend 5.97 trillion rupees ($89.7 billion) on infrastructure in the 2018-19 financial year, more than triple what was allocated in 2014-15.
India’s economy is expected to grow by more than 7% in the current fiscal year starting in April, compared to an estimate of 6.6% the previous year.
