http://www.economist.com/news/finance-and-economics/21568397-indias-love-affair-public-private-partnerships-faces-stern-test-rippp
This article talks about a grim situation in India in which
most of their public transportation is losing money quickly while public
transportation owned by the private sector is still doing fine. It starts off
by talking about how Delhi’s new train link that connects Delhi to its airport
has been shut down for quite some time now due to engineering faults that have
yet to be fixed. Also starting to fail is one of India’s newest and biggest
power plants, the reason being that the cost of coal has been soaring as of
lately. Some have been comparing it to the 19th century railways
boom in America where investors were enticed by the promise of incredible
returns on their investments, but later received almost nothing. Between the
years of 2007 and 2012, $225 billion was invested by private sector investors
into the infrastructure which equated to almost 12% of the country’s GDP in
2012. However as of recently, and fresh
activity has been stalled. Vinayak Chatterjee is consultant at one of
India’s largest consulting firms, he has compared the recent economy to a boa
constrictor, very hungry and fast at first, but once its had its meal it slows
down and sits idle for a very long time. That comparison is made because of the
fact that after building a brand new pipeline, the value of that pipeline
dropped 52% within one year. As far as anyone can see there is only one
solution, to reduce the ricks projects face by removing red tape as well as any
and all political affairs. This would help with cutting the cost of capital which
in turn would see more cash from abroad coming into the country, creating one
of the great investment opportunities of the century.
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