NBFC crisis could slow down projects, derail India's robust growth story

Manzoor Ahmad lost his job as an electrician and is struggling to make ends meet after a crucial road tunnel project shut down in Srinagar, the summer capital of Jammu and Kashmir state in the north.

Construction of the Z-Morh tunnel came to a halt two months ago after Infrastructure Leasing & Financial Services (IL&FS), one of India's top infrastructure funding companies which was helping build the project, stopped paying contractors in the face of a severe cash crunch.

"I have no work since work on the project was stopped in July," said Ahmad, 34, who was earning about Rs 30,000 ($413) a month.

Hundreds of other people working on the project are also out of a job because of non-payments by IL&FS. The company has also defaulted on its debt obligations, roiling Indian markets and sparking worries of a credit crunch in the shadow financing sector.