New Delhi: Macro-economic risks such as currency weakness, global trade protectionism and rising interest rates as well as political uncertainty could delay India’s progress in meeting its infrastructure deficit, credit rating agency S&P Global Ratings said on Monday.

In a report titled “India’s Infrastructure Marathon: Why Steady Growth Can’t Close The Supply Gap", S&P said the infrastructure sector had a high correlation with the overall economic environment. “Macroeconomic roadblocks could strain the government’s budget or reduce project returns for the private sector. Elections scheduled for 2019 could also fuel political and policy uncertainty," it added.

The rating agency said cost overruns due to a complex land acquisition process and environmental issues could further delay progress in meeting the infrastructure deficit.

S&P Global Ratings credit analyst Abhishek Dangra said the intensity and duration of macro shocks would be key. “We still believe that India’s economic growth opportunities and the viability of projects should continue to attract capital," he added.

India will face a $526 billion infrastructure investment gap by 2040 of the $4.5 trillion investment it needs by that time, according to the latest Economic Survey. There are 1,263 projects in progress across sectors such as power, road, railways, shipping and telecom.

The main reasons behind the infrastructure investment shortfall, the survey said, were the collapse of public private partnerships (PPP), stressed balance sheets of private companies, and problems with land and forest clearances.

S&P said the country’s progress at scaling up its infrastructure was visible in its decreasing power deficit, high passenger growth at airports, rising renewable capacity, and large metro train projects.

Dangra said the power sector was moving towards equilibrium in demand and supply. “However, fortunes will vary for thermal and renewables. No more new thermal power capacity is required until 2027, other than for projects already under construction; while renewables will continue their strong growth based on competitive tariffs," he added.

The rating agency said it expected the energy sector to deleverage as commissioning of new capacities increased earnings even as capital expenditure remained high.

S&P said regulations significantly affected cash flows and consequently investor interest. “For instance, airports face long delays in implementation of tariffs and ambiguity in tariff components," it added.