New Delhi: Macroeconomic 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 Standard and Poor’s (S&P) 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 has 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 said.

The rating agency said cost overruns due to complex land acquisitions and environmental issues could further delay progress in closing the infrastructure deficit.

S&P Global Ratings credit analyst Abhishek Dangra said the intensity and duration of macro shocks will be key to their overall impact.

“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 infra 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 (PPPs), 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 is shown in its decreasing power deficits, high passenger growth for airports, rising renewable capacity, and large metro train projects.

Dangra said he believes the power sector is moving towards equilibrium in demand and supply from a deficit situation.

“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 expects the energy sector to deleverage as commissioning of new capacities increase earnings even as capital expenditure remains high.

S&P said regulations significantly affect cash flows—and consequently investor interest—as investors generally prefer sectors where regulations or growth prospects provide greater visibility on cash flows. “For instance, airports face long delays in implementation of tariffs and ambiguity in tariff components," it added.