India - Economics
Infrastructure bottlenecks for Indian development
Lynus Misquitta argues that for a sustainable growth, India needs US$ 320 billion only to upgrade infrastructure over the 11th Plan, and a good government. Power, air traffic, railways, roads, sea ports and corruption are analysed. From Mumbai.
Jawaharlal Nehru had a vision of transforming India into a fast developing nation and he idolized the technology-based projects like the Bhakra Nangal Dam to turn his dreams into a reality. But resurgent India had very few technically qualified people and so foreign technicians had to be procured to build these temples of development at very hyperbolic costs. This was in the fifties. In the nineties, when liberalization of reforms was initiated, Rajiv Gandhi, grandson of Nehru, was intent on giving a mighty push to the application of modern technology to India’s development and he particularly gave a great impetus to the advancement of Information Technology to steer India into the 21st Century as a bristling economy - an economic power to reckon with - and Indians are heading towards that goal by dint of hard work and backed by a plethora of qualified and competent and dedicated workforce.
The advent of liberalization and bold reforms from 1991 gave a strong impetus for the growth and development of various sectors in India, and this fast development is placing extreme pressures on the infrastructure, supply chains and logistics capabilities. Most leading cities like Calcutta, Delhi, Mumbai, Bangalore and Hyderabad are overstretched with fast growth and suffering from congestion, water and power scarcity, shortage of proper roads, highways and sea ports, as well as passenger and cargo congestion at airports.
Due to the above scenario, we need around 320 billion dollars only to upgrade the infrastructure over the next 5 years of the 11th Plan. According to Keynes, spending on infrastructure is one way to get out of the economic downturn. The current economic slide has not affected us significantly as we have a very young and qualified white and blue collared workers, who are willing to strive for the development of the country and a financial system that is foolproof from being held hostage by the loanees at any point of time and place.
The bulk of the population of working age group, both men and women, is of young people whose age will average 29 in 2020 compared to 37 in China and the United States, 45 in Western Europe and 48 in Japan, according to C. P. Chandrasekhar, writing in the magazine Frontline. The impetus made by these youngsters and the advances made in research and development accelerates growth leading to better opportunities. But to sustain this growth we need a world class infrastructure and a good government who will provide the same consistently in order that the dreams of our enterprising and ingenious progeny turns into reality. There are some hiccups in the political scenario but the present enlightened electorate will, in due course, clean the chaff from the corn.
The bulk of the population is of people whose age will average 29 in 2020 compared to 37 in China and the United States and 48 in Japan.
Right now the main infrastructure bottleneck is power and air traffic. Power shortage of 12% at peak levels and 8% at non-peak hours leads to a GDP loss of around Rs 3,000 billion. Tadashi Kondo, Country Director, Asian Development Bank, says that national highways in India account to 2% of the total road length, but 40% of the total traffic. Besides, of the national highways, only 2% are four lane, 35% single lane and 53% are two lane. This is retrograde for business people as it adds to the cost of doing business, and this deters foreign and private investment, and puts constraints on the growth process.
Air traffic bottlenecks are more severe as a large middle class travels by air. Even the cargo needs air transportation and this too is slow in taking off and meeting the required targets. India has 125 airports, out of which 11 are international. Passenger and cargo traffic grew more than 20% over last year, and the calculations are that it will grow over 15% in the next 5 years. India needs to invest over Rs. 40,000 crores to upgrade this air traffic infrastructure so that we have better airports equipped with the latest technology.
The railways too need a lot of upgradation. The present network was left by the British when they left in 1947. Of course, we have spent a lot to increase the rail tracks to developing states but we need more rakes and better equipment to carry the daily load of passenger traffic as the railways is the only transport that is cheap and is widely used by the masses. If one witnesses the scenes at a railway station in any city during peak hours it is enough to justify the need of more trains at regular intervals. Presently, one sees people traveling even on the top of the trains and nearly spilling out from the open doors. But there is a vast improvement and the railways are making good profits. No wonder the railway minister Laloo Prasad was recognized as a management guru. But since India is divided into various states, the home towns of the minister and his cronies pressurize for more and better trains. This is one bottleneck. The other bottlenecks - and they apply to all sectors like power, air or sea traffic - are the inefficiency in implementing projects and completing them on time.
In all countries there is some time lag in awarding and executing projects as bureaucracy and redtape is present everywhere. But in India the time taken is unusually more and this leads to further bottlenecks of cost overruns as prices of raw materials and wages of labour increase yearly. Not only that, the technology earlier specified gets outdated.
In all countries there is time lag in awarding and executing projects as bureaucracy and redtape is present everywhere. In India time taken is more.
Besides, impediments in the financial system coupled with the global meltdown affect core infrastructure sectors. Also construction companies, policy makers, specially selfish politicians, bureaucrats with an axe to grind, affect the timely implementation of the necessary projects.
Land acquisition, is another bottleneck when politicians and entrepreneurs try to hoodwink the legitimate landowners by reducing the land reimbursement fees and causing problems for themselves and for the recruited workers of a certain project. We have a recent example how the Nano car project of the Tatas was shifted from West Bengal to Gujarat. In this case the fiery politician Mamta Bannerjee, the present Railway Minister, would not budge an inch to Ratan Tata who ultimately was welcomed to Gujarat by Narendra Modi, Chief Minister of that state. But a lot of time and money was wasted to shift the project.
Sumant Sinha, writing on the Economic Times says that the shift of the economic gravity of the world to Asia will get more pronounced. The growth engine of the world will no longer be the US consumer, but the Asian consumer. And talking of Asia, India and China are the two emerging economies. India has to infuse the necessary infrastructure facilities to keep up the momentum and for this the enlightened Indians should recruit a dedicated workforce who are committed to the development of India, specially in view of the fact that, even today, nobody cares for farmers living in remote villages where, due to paucity of roads and cold storage facilities, thousands of crores of rupees of produce rots in the fields.
The critical role of infrastructure can be seen in the miraculous transformation of Hong Kong, Singapore, Thailand, Malaysia, the Republic of Korea and China. These countries had invested heavily in infrastructure. India is heading towards that goal, very soon. Vayalar Reddy, Union Minister of Overseas Indian Affairs says that India is perceived as the future engine of growth, a safe investment destination and a technological hub by the year 2020, with a 820 million dollar workforce.
But again there are some other bottlenecks in the way of development. Sometimes the infrastructure investment suffers due to fiscal problems and agricultural subsidies as India is also dependent on agriculture and sometimes the droughts and floods play hide and seek on this Indian subcontinent. There is another bottleneck of our Indian companies finding themselves at a disadvantage when it comes to tender specifications for infrastructure projects as they, sometimes, cannot match the experience and expertise of overseas companies.
The Committee on Infrastructure has envisaged an expenditure of 20,000 billion rupees during the 11th plan. 70 percent of this amount will come from the government of India and 30 per cent from the private and foreign funds. But the money must be pumped immediately due to the gestation periods involved and due to the escalation of costs every now and then. Right now Information Technology is a money spinner as we export software worth millions. In other fields we have 74 mega projects and 462 major ones. Already delay in implementation of 321 projects has resulted in cost overruns of over 15% in the quarter Oct-Dec 2007. Also, as per Shankkar Aiyar and Shyamlal Yadav, as of May 2009, 310 of 591 government projects are delayed and sanctioned costs are gone up by 10%, to Rs 5,74,429 crores, and final costs are estimated to go up by 38% or Rs. 1,70,000 crores. We get a lot of help from the Asian Development Bank (ADB), but it all depends on the bonafides of the construction companies, their expertise and the raw materials they use. There are some cases where cement girders of bridges have given way. Recently there was a case in Thana, near Mumbai, where a bridge girder collapsed on a passenger train.
Indian development will go on, inspite of the bottlenecks mentioned above and the bottleneck of corruption. We must only pray that no untoward incidents like natural calamities and sabotage interfere with our infrastructure facilities. India is a nation of millions of dedicated people who have struggled through hard days during the British regime and post independence years, and we seem to rise from the ashes, as we strive for international cooperation and peace. Indeed the victories of peace are greater than war. Hail India heading towards a vibrant economy.