RIYADH, 4 September 2006 — India’s economy is much talked about today. While the future seems promising what concerns its planners is its infrastructure or lack of it. The problem can be gauged from one’s experience that it takes two hours to reach the downtown areas of Bangalore, Delhi, Madras, Calcutta or Bombay from their respective airports though the distance covered could be as little as just 30 km!
Whether it is financial capital Bombay or the IT capital Bangalore or the national capital New Delhi, the cities and towns are struggling to cope with the existing infrastructure that is crying for more investment to live up to the ever expanding needs of industries and the mammoth population. India is often compared with China but actual figures leave India far behind.
When it comes to crucial areas such as infrastructure, compared to China, India spends far less. It spent just about $28 billion in 2005 compared to $201 billion spent by China. This means India spent 3.5 percent of its GDP for infrastructure development as against 9 percent of the GDP spent by China. According to the Asian Development Bank, India must spend additional 2.5 to 3 percent of its GDP every year on its infrastructure to sustain its present economic growth of 8 to 9 percent. The question of catching up with China simply does not arise!
Infrastructure development is an issue in India. Earlier this year, some of the major information technology companies who brought India’s southern city of Bangalore on international map as the world’s IT hub had threatened to close down their operations and move out of the city simply because the city, as is the case of most of other Indian cities, did not have enough roads for vehicles to ply comfortably.
Rattled by the possibility of losing the precious foreign exchange and thousands of skilled jobs, those at the helm promised all kinds of sops for the industries to stay put. Speeding up the work on the pending infrastructure projects was one of them.
As a squeal to this, the four-lane expressway (111km) between Bangalore and Mysore in southern India has now been completed after passing through many roadblocks. It is not that those in the power produced something out of blue.
The project to link the two IT cities had been there for sometime and the much publicized corridor should has been inaugurated last year before October 2005. In Indian context, a delay of 10 months means nothing and perhaps many mutinational firms would take it in their stride as something normal.
The investors and industrialists in India are aware that Indian government alone cannot manage the capital required to strengthen the infrastructure. India’s fiscal deficit of 10 percent of its GDP means the government’s hands are tied.
Despite the Communist parties’ constant opposition to development projects that call for public-private partnership the government has shown keen interest to go ahead with such partnerships. The privatization of Bombay and Delhi airports, underground rail network in key cities of Bombay and Bangalore are some of the major areas in which the government has dared to move with the private parties.
The Indian investors too seem to support these government initiatives as they have responded with enthusiasm to the public offerings of companies involved with the infrastructure development along with the government. The GMR Infrastructure which has bagged the contact to develop the Delhi’s much criticized airport has seen its initial public offer oversubscribed on the first day itself. The company had targeted to raise $200 million. The Foreign Institutional Investors too have been showing keen interest by putting their money in other infrastructure related projects.
The offloading the job to local private players makes the government job much easier besides ensuring faster completion of languishing projects. Such a step, for example, promises to over-haul the Bombay airport, which is rated as the worst in the world by one of the aviation publications recently.
The creation of much needed road network all over the country is another huge challenge that experts feel can be overcome through participation of private agencies. The government on its part needs to ensure that it continues to take confidence-building measures and minimizes the risks associated with such projects such as lawsuits by the land-losers and other affected parties.
It is common feeling that the government has not been strong enough on issues such as pension reforms and opening the insurance sector. However, with investors keen to support new initiatives that promise new air terminals, cargo complexes, underground rails, four lane roads, new townships etc. India can hope to take its infrastructure at a new level and keep its economic growth story intact.
What matters is strong political will to go ahead and build on these positive developments not withstanding the on-and-off criticism of Leftist politicians who could be pacified by explaining to them the Chinese model of development during one of their friendly meetings with the government!