The six-lane Eastern Peripheral Expressway or Outer Ring Road surrounding India’s capital Delhi is likely to be fully complete by December 2017, almost a year ahead of the original target date. The 135-km long project, passing through Haryana and Uttar Pradesh, has two major bridges over the Yamuna, four flyovers, six railway-over bridges and 70-plus vehicle underpasses.Once ready, the project is expected to ease traffic in and around the National Capital Region. The fact that of the Rs 11,000-crore project cost, more than half was spent on land acquisition indicates no stone was left unturned to expedite the expressway. Satish Parakh, managing director of Ashoka Buildcon, one of the five companies that share the workload for building the expressway, credits the central government and its coordination among various agencies and governments for the speed of execution. Take, for example, the railway crossings. Parakh says a railway over-bridge (RoB) usually takes 18-20 months to build, given all the permissions needed. However, for this project, the RoBs took an average of just 120 days to build.Infrastructure players are happiest when they can complete a project fast. So, why then is Parakh a worried man? He fears a rush of regulatory changes may now undo all the good work the government has put in and project delays across India will be inevitable. The company has projects underway in 19 states. Companies like the Nashik-based Ashoka Buildcon may also be staring at a cash crunch. In November 2016, demonetisation (of Rs 500 and Rs 1,000 notes) had forced a 23-day toll collection hiatus on toll road projects. The toll operators/road concessionaires have not yet been fully compensated.Then there is the goods & services tax (GST) regime that began yesterday. Parakh estimates an 8-9% “tax impact”. Also, the new accounting standards IND-AS that came into force from 2016-17 now force the company to recognise future income and pay taxes today. “Are we supposed to borrow to pay taxes now? What about those companies who are already overloaded with debt ?” Parakh asks. Like Parakh, there are others who are getting increasingly overwhelmed by the regulatory deluge.Real estate, for instance, has to contend with the new regime under the Real Estate (Regulatory & Development) Act or RERA that is being notified separately by states, with each setting up its own realty regulation under the Central act passed in mid-2016. Niranjan Hiranandani, managing director of Hiranandani Group, when summing up the mood of the real estate sector, may have spoken for many other business sectors, too. “Demonetisation affected us. Now the uncertainty around RERA and GST is bothering us. Real estate has gone through many down cycles since 1991, almost every five years. But what I have never seen is something like three tsunamis that have now come together,” he told ET Magazine.There are no prizes for guessing which regulator has really stepped on the gas: the Reserve Bank of India (RBI). Its action against bad loans gives a choice to the highly indebted sectors like steel, infrastructure, power and telecom to either sink or swim. The public sector banks (PSBs) have most of the bad loans (over Rs 6 lakh crore) as non-performing assets (NPAs) on their books. The RBI started by identifying 12 bad loan accounts adding up to almost Rs 2 lakh crore that are to be referred to the Insolvency and Bankruptcy Code (IBC). Ten days later it listed 55 more accounts and gave banks six months to sort them out. On Saturday, ET reported that bankruptcy proceedings could be initiated against a dozen more companies. Under the IBC, the lenders appoint their own person to run the show and virtually take over the assets, leading to liquidation within 180-270 days.This action of the RBI has the banks worried about their own survival and it has also set the cat among the pigeons in the Indian steel industry. Credit Suisse research head Ashish Gupta suggested in a report dated June 21 that bankruptcy will drive consolidation and the top four Indian steel companies may soon own 60% of Indian steel capacities. In a separate report, Gupta also suggested that consolidation among PSU banks may not be a very good idea as it would weaken the stronger PSU banks.The Financial Stability Report of the RBI released on June 30 showed that the gross net non-performing assets of all scheduled commercial banks together increased from 9.2% in September 2016 to 9.6% in March 2017. The report also said that there is a real danger of this number going up to 10.2% by March 2018. In the recently published annual report of Bajaj Auto for 2016-17, chairman Rahul Bajaj has picked the PSU banks’ NPA woes as one among three reasons holding back India’s growth story, the other two being demonetisation and lack of private sector investments. He said: “With these banks being badly stressed, there seems to be no appetite for advancing term loans without which it is virtually impossible to envisage the kind of investment spends needed for getting us securely on to a higher growth path.”Ajit Gulabchand, chairman of infra major HCC Ltd, explained that, in the absence of an effective bond market, the banking play is crucial. “The problem of debt and NPA began with the previous government and even today there has been no resolution. Several ideas are being tried — the RBI has come up with new provisioning norms, a bankruptcy code. But we do not yet have a clear grip on it,” Gulabchand told ET Magazine. Pankaj Patel, president of industry lobby FICCI, added that early resolution of the NPA issue is extremely important for improving the health of the banking sector as well as for higher credit off-take and economic expansion. The clampdown on bad debt and the simultaneous rolling out of the GST regime have other sectors worried too.Rajan S Matthew, director-general of Cellular Operators Association of India, points out that the financial health of the sector is in doubt. He says the cumulative debt of the telecom companies (mostly still seen as good assets by banks) is Rs 4.5 lakh crore, while revenues are less than Rs 2 lakh crore. Competition induced by the entry of the deep pockets of Mukesh Ambani’s Reliance Industries through its brand Jio has pushed revenues down, making it tougher to service debt, and return on capital employed for the sector is languishing at 1%. “Over and above this, the GST rate for the sector has been set at 18% which is 3% higher than the prevailing rate, while the industry has been asking for a rate of 5%. This increase in the GST rate translates into an estimated Rs 6,000 crore increased expenditure for the sector,” Matthew said.The spread of troubled sectors is wider than just steel, power, infrastructure, telecom and the banks. The usual engine of exports growth, the information technology services sector, is also grappling with an obsolete business model. Investments by the private sector are also low, the preference being for acquisitions over greenfield expansion. But some are seeing light ahead in the tunnel. Chandrajit Banerjee, director-general of Confederation of Indian Industry, feels the worst of the debt overhang is probably over. “Companies have been looking for funds outside of the banking sector. Certain sectors are performing well, like automotives, aviation, and renewable energy, and these would help boost the momentum,” he told ET Magazine.Among the sectors under pressure, steel surely will see some consolidation along the way. An Essar Group spokesperson said it is too premature to discuss a sale of its steel assets. Tata Steel managing director TV Narendran had told ET in an interview early in the week that the steel sector has to grow. “Fundamentally, if we believe that India as an economy will grow at a certain percentage, then it cannot happen without steel consumption growing. Ultimately we have to build infrastructure.”Infrastructure too has its own special challenge. The public-private partnership (PPP) model where the private sector player takes on some of the risk for greater profits has been discredited. Vinayak Chatterjee, chairman of consultants Feedback Infra, says: “The balance sheets of the big boys in infra do not allow them take on any more PPP projects. They also have realised that if the project runs into trouble the government will not bail them out.”Chatterjee adds that while global PE funds are coming in and buying projects, they are not investing in greenfield areas — so even though foreign money is flowing in, no new infrastructure is getting created. He hopes that the government will try and revive the PPP model. He also sees green shoots, especially with smaller infrastructure companies creating large order books. “I see a resurgence of urban infra projects like smart cities, water supplies, city roads, multi-level car parking, waste to energy, garbage disposal. There are 17 metro projects in the pipeline. I see a new awakening on the city renewal projects.”Chatterjee points out that mid-tier companies like Dilip Buildcon and Sadbhav Eng ineerin g often have order books that are higher than their annual turnover. “There is a ripple effect and resurgence in steel and cement companies. But in the next five years, it is EPC players who will dominate, unless government makes a big effort to implement the Vijay Kelkar Committee Report and get PPP going.”The committee that was set up to review the PPP model and had reportedly proposed an overhaul of the existing framework had presented its report to the finance minister in November 2015. Over the past week, business leaders have spoken in varying voices. Reliance Group chairman Anil Ambani, who has operations in both telecom and infrastructure and has put assets on sale, welcomed the GST as a harbinger of India’s economic freedom. Kotak Bank vicechairman Uday Kotak tweeted earlier in the week with a hint of caution saying, while GST, RERA and IBC can transform, “friction risk in short run” needs to be managed.And Biocon’s cofounder Kiran Mazumdar Shaw tweeted on Friday that the GST in its current form is not what it had set out to be. Also, it seems a consensus is emerging that it will take two years for a turnaround in India Inc . In an interview with ET earlier this week, Aditya Birla Group chairman Kumar Mangalam Birla had indicated that it would take eight quarters for private sector investments to restart in earnest.Ganesh Natarajan, an IT services veteran who has turned entrepreneur once again, also set two years as the target date by when he expects a sectoral revival. Gulabchand of HCC said the government of the day is dealing with huge legacy issues left behind by the previous regime. “Since they didn’t deal with them adequately in the first two years, those issues have become bigger now. So, it will take a little while — at least another two years — before things look better.”Raamdeo Agrawal, joint managing director of Motilal Oswal Financial Services (MOFS), sees a bright future once the capital expenditure cycle turns positive. “Earnings will only improve with government and private sector capex turning positive. Once this cycle turns positive, corporate earnings growth would be bigger and better than what we saw in 2006 to 2008.” The benchmark BSE Sensex has steadily moved up by about 5% through the April-June quarter and hit an all time high of 31,522.87 on June 22. In the last week of June, GST and bankruptcy nervousness set in, bringing it down to 30,857 by June 30.Nilesh Shah, managing director of Kotak Mutual Fund, says: “Clearly, liquidity is driving up stock prices. Beyond that, investors believe problems like bank NPAs, core sector debt et al would be resolved in the months to come.” Sankaran Naren, chief investment officer at ICICI Prudential AMC, indicated that with credit growth muted, the markets are not yet near their peak. “For the market cycle to peak requires high credit growth, good earnings and capex cycle, which has not happened as yet. Despite lower corporate earnings, the stock market has done well over the past one year. We believe markets could ideally peak only when corporate earnings improve.”Prithvi Haldea, a long-time watcher of Dalal Street, feels there is a lot of money going around in the Indian market, without proper investment avenues; and that markets are often disconnected from the realities of the economy. He points out that majority of the public issues in recent months were designed to allow exits to private equity investors.“IPOs that are to fuel growth are not happening. So, if you look at investment for growth via either debt or equity, both aren’t happening.” Yet, when Agrawal of MOFSL identifies “savings” and “government expenditure” as the two best investment themes of the present, he holds up a mirror of the current state of the economy and what is moving it. It also says that even now infrastructure companies like Parakh’s Ashoka Buildcon that work for the government are standing on solid ground, when compared to their compatriots in other troubled sectors.