FinHow

On June 8, 2012, ET announced that Fraport AG, the world’s second largest airport operator, is planning to quit India (refer article here). The news came a day after prime minister promised a big thrust to infrastructure and effectively took over the infrastructure development.

Why is Fraport quitting India?

Fraport India MD Ansger Sickert said

There are some voices saying that by the end of the year, there will be opportunities in brownfield and greenfield airports. But I have heard that so many times before… I don’t have the mildest confidence if and when a project would happen.

What is the impact of Fraport quitting?

1. At present, India needs processes equally desperately as it needs material (infrastructure). Fraport brought us the expertise of operating airports. We will have to devise our own processes, with our own pitfalls and learning curve. These pitfalls, learning curve and devising the best practices will cost time and money. India is already fighting its supremacy over economies such as those of China, Brazil and Philippines and we are short of time and money.
2. With an international and renowned player showing low confidence on Indian economy, others may follow suit. At present, India needs FDI to maintain growth rate. In fact, growth rate has fallen to an all-time low of 5.3% average for 2012 and it shows falling trend from 2010 onwards (refer India GDP Growth Rate).
3. With India’s credit rating of BBB- or equivalent and outlook negative or stable (refer credit ratings of countries), such comments from Fraport India MD can be devastating. If our credit rating falls further then credit to India will get costlier, thus, making everything costlier and hampering our growth rate even more.

In conclusion, I feel government should not ignore such statements and action from such a major player. Government should perform root cause analysis and keep India on a growth path.