MUMBAI, February 13: The latest issue of Money & Finance, brought out by rating agency ICRA, said that no amount of foreign exchange reserve is adequate to combat the currency crisis and contagion. "The Asian experience suggests that the strengthening of fundamentals is no guarantee against currency crisis when the scale of movement of capital across nations is large and primarily expectations driven," an ICRA release on Friday said.India, according to the rating agency, has not felt the full impact of the contagion so far on account of the absence of the capital account convertibility, structured external commercial borrowings, banking sector reforms and the non existence of the "bubble factors" -- property and stock-- in the portfolio of the banking system.
ICRA has singled out the slow pace of investment in the infrastructure sector as the major constraint to economic growth. Tardy investment in physical infrastructure like power, ports and roads has a direct negative impact on core industries likesteel and cement which cater to construction and heavy engineering, the rating agency said on Friday.
"Without comprehensively addressing the policy and the systematic and organisational weaknesses that adversely affect the infrastructure sector, no early and easy solutions can be found," ICRA said.
For the successful involvement of private investment and even public investment funded by accessing the capital market and commercial lenders, it is imperative that a new policy and tariff environment is brought into place, it added.
The rating agency has called for a deep debt market to back the long-term assets in the infrastructure sector. "Notwithstanding some efforts, the secondary debt market has failed to take off and trading even in government paper is extremely thin. The viability and fairness of channeling long-term investment and foreign savings into funding long-term assets in infrastructure is contingent on the emergence of an active and liquid market for such debt," the ICRA release said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
