Bureaucracy could slow approval processes in obtaining licences and setting up businesses, prolonging project gestation, the US-based rating agency said in a research report.
Despite the economy’s strong potential, there is a risk that the pace of investment in India’s manufacturing and infrastructure sectors could slow because of limited economic liberalisation or slower policy implementation.
“India’s higher bureaucracy in decision-making will reduce its attractiveness as a destination for foreign direct investment (FDI), especially when competing with other developing economies in the region, such as Indonesia and Vietnam,” Moody’s said.
Efforts under way to reduce corruption, formalise economic activity and bolster tax collection and administration are encouraging, although there are increasing risks to the efficacy of these efforts, it said.
“Lack of certainty around the amount of time needed for land acquisition approvals, regulatory clearances, obtaining licenses and setting up businesses can materially prolong project gestation. Furthermore, India’s limited multilateral liberalisation with respect to regional trade agreements will also weigh on foreign investments in the country,” it said.
“While demand across the manufacturing and infrastructure sectors will grow 3-12 per cent annually for the rest of the decade, India’s capacity will still rank well behind China’s by 2030,” a news agency quoted Moody’s as saying.
The US rating agency projected India’s growth for 2023 at 5.5 per cent.
ALCHEMPro News Desk (DS)
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