Engaging India is an online column analysing the issues, trends and forces behind the business and politics shaping India and its impact on the world. Engaging India appears exclusively on FT.com India , a dedicated online section on India , and is written by Jo Johnson, the Financial Times' South Asia bureau chief; Amy Yee, New Delhi correspondent; and Joe Leahy, Mumbai correspondent.

For India to realise its ambitions of sustaining 9 per cent annual GDP growth in the medium term and ensuring that the benefits of growth reach more and more people, sound infrastructure is critical.

• Financial advice for India

Since the state of India 's infrastructure does not match her ambitions - despite a strong political consensus on the need for infrastructure development - it is imperative to examine what is holding back India 's infrastructure.

Let us first examine the context. India has, with limited success, adopted a strategy of infrastructure development that has two key components: firstly, an increase in the share of private investment; and secondly progressively higher reliance on user charges.

While projects can be developed as purely public, purely private and public-private partnerships, policy makers have emphasised the last two.

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Historically, India 's infrastructure spending has been rather low (3-5 per cent of GDP), but is being sought to be stepped up to over 9 per cent of GDP by 2011-2012, with the help of an aggressive pursuit of the adopted strategy.

Success, so far, has varied widely across sectors, with telecom, civil aviation and to some extent, national highways, doing much better than others.

Now, back to the main question: what is holding India back?

The factors impeding infrastructure development can be classified into two broad categories: financing constraints and sector governance constraints.

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With domestic savings growing rapidly, the financing constraints have been arising not due to shortage of liquidity, but the requirement to intermediate larger and larger savings into infrastructure, which require long term funds and involve firstly, relatively high sunken costs and, secondly, enormity of project size.

Since traditionally, we never depended on markets for infrastructure financing, our financial system is not prepared for meeting these demands.

At the current level of investment demand, which is rising but still low, there is hardly any bankable project, irrespective of size, that is not progressing because of shortage of funds.

But as investment demand picks up momentum, problems will emerge. Indeed, some signs are already visible. Some banks, for example, are close to exhausting their prudential exposure limit to power sector, owing largely to the enormity of projects.

Further, the infrastructure risk is getting concentrated in a few hands, partly because of lack of mechanisms to distribute risk widely (such as securitisation and use of credit derivatives).

Finally, commercial banks have emerged as the dominant financiers, even though their own funding is short-term. Space does not permit me to get into details, but the broad point is that all these may have been raising systemic risk.

In my view, however, the resolution of these issues is only a matter of time. For example, the development of a market for long-term corporate bonds, some initiatives for which have already been taken, will go a long way toward addressing the major financing issues.

The more formidable problems however relate to sector governance. These include problems of land and natural resources allocated to special economic zones, resources such as drinking water and waste water.

Irrigation and power for agriculture, tariffs are being set at ridiculously low levels as compared to the cost of service provision, mainly because of expected political gains. This makes utilities providing these services unviable and results in deteriorating service quality.

Delays occur not only with land acquisition, but also a host of other issues such as lack of mechanisation, poor planning, need for a large number of clearances (which have to be sought from numerous agencies) and most importantly, lack of a strong accountability framework for project developers.

These sector governance issues give only a flavour of what is hurting infrastructure development in India in the context of the strategy adopted, and are by no means an exhaustive list. Although they appear formidable, our experience in the successful infrastructure sectors demonstrates that the key to success lies in persistence with reforms.

The writer is the head of India 's second largest private sector bank HDFC [Get Quote] and head of the government's infrastructure taskforce