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S&P slams India's infrastructure

March 11, 2004 17:28 IST

International rating agency Standard & Poor's on Thursday lauded India's competitiveness in information technology, business process outsourcing and telecom sectors but warned that inadequate infrastructure continued to hamper sustained high economic growth.

"Infrastructure has proven to be a key constraint. The higher cost and lower quality and reliability of electricity, road transport, rail transport, ports and water supply continue to hamper sustained high economic growth in India," S&P director (Asia-Pacific), Sharad Jain, said in a statement from Singapore.

Frustrating labour laws, continued reliance on timely rainfalls for a large part of the economy are some of the other impediments affecting the Indian industry, he said.

The S&P warning assumes importance in the background of a recent projection by ICRA, which said 8.0 per cent GDP growth was not sustainable and would come down to 6.4 per cent in the next fiscal.

S&P, which had assigned a foreign currency rating of "BB" with "stable" outlook and a local currency rating of "BB+", also cautioned investors against getting "carried away" by the current enthusiasm in the country.

"Low interest rates and booming equity prices are partly responsible for the strong sentiments on India. However, these factors are often beyond the control of government and businesses in India, and therefore can change very quickly," Jain said.

S&P said India offers vast business opportunities due to large middle class population, growing consumer purchasing power and large unfulfilled demand for a number of products.

"However, businesses face stiff hurdles in way of capitalising on this potential," Jain said.

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