Consider how this affects the above economic problems. Also, how these seemingly separate problems may be so intertwined that one can’t be fixed without fixing the other/s as well. Take electricity supply: Policies were revised in December 2009 for developing so-called mega power projects (MPPs) for generating electricity. Projects with a minimum capacity depending on location and energy source, e.g., thermal plants of 1,000 megawatt (MW) in most states, or of 700 MW in some states, or hydel plants of 500 MW in some states and 350 MW in others, designated as MPPs were given concessions, such as reduced customs duties, to facilitate viability at reasonable tariffs.1 India was on a roll, with excellent growth prospects. Arranging long-term power purchase agreements (PPAs) seemed easy at the time.Things stayed on track for a few months, and then came the crises, namely, the 2G scam, followed by the coal scam.The sudden cancellation of licences stalled momentum, and subsequent weakness in global markets further hobbled the recovery. As of March 2017, 25 such projects with a capacity of 31 gigawatts, which were to establish PPAs in the prescribed period of 36 months, then extended in 2014 with other concessions to 60 months, were stalled because of adverse developments (see chart ).
India's GDP - Annual Growth Rate - December 2009 to April 3, 2017
Added later: April 12, 2017 - Excerpts from other articles on this blog:
Another often expressed view is that bankers lack the requisite skills in assessing projects, or working out repayments. While this could be true of the odd case of poor evaluation and the irrationality of herd mentality, most bankers are well-versed in evaluating cash flows, but no skills can forestall unforeseen adverse developments. Yet another view is that corporates should suffer the consequences for their estimation errors, but this is precisely why contracts have “material adverse change” or “force majeure” clauses, whereby contracts can be rescinded if there are unexpected adverse changes. Good projects can become unviable because of unforeseen events beyond corporate control, such as a decline in demand (e.g., because construction, manufacturing, and communications sectors all slowed),or if costs and tariffs are outside the range considered reasonable and used at the time of evaluation, or of scope (such as cancelled licences, or regulatory delays).