Jagat-Shah
Jagat Shah
Chief Executive Officer
Global Network

There is a sense of hope among the infrastructure companies in the post-election scenario. The new government needs to look at power, roads, ports, airports, railways, oil and gas, urban transportation and water supply sectors. And international partners can play a big role in it, writes Jagat Shah, Chief Executive Officer, Global Network, an international trade consulting firm based in Ahmedabad.

India’s emerging economic power, like that of neighbouring China, has been spurred by its momentous growth rates in the past few decades. But years of underinvestment in infrastructure have left the country with poorly functioning transit systems and power grids that have further endangered its slowing economy. Burgeoning trade is putting pressure on India’s inefficient ports, and rapid urbanisation is straining the country’s unreliable electricity and water networks. Red tape and political inertia have thwarted the success of foreign investment partnerships and bruised India’s international standing, discouraging further outside investment. Such large-scale failures had raised sharp debates about how the country’s infrastructure weaknesses will hamper its economic future as it struggles to recover from a slowdown.

Things seem to be changing now. News such as these are changing the perception globally – “The Narendra Modi government has cleared seven big-ticket investment projects worth Rs. 21,000 crore, some of whom have been held up for decades, because of hurdles ranging from environmental issues to financing problems.”

One example is the clearance of a 235-km railway line that is critical to tap Chhattisgarh’s second largest iron ore reserves and ensure the survival of the Bhilai Steel Plant whose current iron ore sources are expected to run out in a few years.

“The resolution of long-pending issues for big investment projects has started in earnest under the new government, with policy problems facing seven large projects having been resolved already,” said a senior government official aware of the development.

Stable government

Project Monitoring Group has become very empowered and active. Forest, mining and environment applications and clearances have gone online for speed and transparency.

Global fund managers have started shifting their focus to the infrastructure sector in India. That in itself is a strong signal of post-election mood impacting the overall economy in India.

The economy has been in volatile state for the past one year and is likely to overcome this spell, post-elections.

The housing sector plays a key role in the improvement of the economy. However, for that to happen, the fundamental need was a strong and stable government with whom one could engage in policy advocacy and measures for quick governance. That is in place now.

The general sentiment is that every industry is in wait and watch mode till the time the contours of the new government at the Centre are not clear.

There is a sense of hope among the infrastructure companies in the post-poll scenario. Post-election infrastructure outlook needs to look at power, roads, ports, airports, railways, oil and gas, urban transportation and water supply sectors. Special focus needs to be put on warehousing, free trade warehousing zones, logistics parks etc. Government has to start looking at projects under planning, announced, awarded, awaiting clearances, land acquisition, financial closure, under implementation, delayed or stalled, abandoned and stressed.

Chinese experience
Interestingly, Prime Minister Narendra Modi had visited several infrastructure projects in China when he was the Chief Minister of Gujarat. When he talks about scale, speed and skill, many a times he refers to the Chinese experience. His dream of home for every Indian by 2022 will need support from all across. His earlier visits to affordable housing projects, among other projects, in China, will come in handy as an experience. Within days of his taking over as the Prime21st-Century Minister, Chinese investors have started visiting India.

The Foreign Minister of China also came recently. China is offering to finance as much as 25 per cent of India’s targeted investment in infrastructure projects over the next few years. As per the plan, the world’s second largest economy will offer about $350 billion (10 per cent of its reserves) to India for its more than $1.4 trillion investment in infrastructure projects, which are planned over a five-year period ending in 2019.

Asia’s largest economy, China, currently has more than $3.8 trillion in reserves that it looks to invest effectively. China has been investing in developing countries in Asia and Africa. In Asia, China has provided funds to countries such as Sri Lanka, Pakistan and Nepal, all neighbouring India.

Two large Chinese delegations of infrastructure investors recently came to Delhi and Ahmedabad from Zhejiang province. A seminar was organised by the delegations in Delhi and Ahmedabad where the issues discussed covered policy expectations from the new government, outlook for infrastructure development, impact on key projects, clearances, funding etc. China Development Bank has since long been showing interest to fund infrastructure projects in India. They are interested in sectors like power, solar, steel, water, oil and gas, mining, ports and railways.

Canada has also been very active in the Indian infrastructure domain with large investments in hydro projects and the transport sector. Canada was a country partner in two Vibrant Gujarat events with focus on infrastructure projects and they are keen to see positive policy changes in infra sector aimed at removing clearance-related hurdles. Project bottlenecks have cost the Indian government at least 2 per cent of GDP annually.

India’s growth story has often been compared to that of China, which has tapped into domestic savings and foreign investment to build its vast infrastructure. India’s reforms came a decade later than China’s, while others point to the disparity in political systems. A lot of people point out the difference between democratic and authoritarian structures, and what those structures do and do not afford.

In the case of electricity, the problem is not Indian democracy but Indian federalism. In China, the electricity sector was initially very centralised, and regional grids corresponded to techno-economic boundaries. In India, much of electricity development has been tied to federal boundaries and a political calculation.

For now, the new government at the Centre is focused on clearing the project jam. Most people in India feel that a lot more has to be done.

Infrastructure is central to creating that 21st century India which is accessible for everyone. International partners can play a big role in it.


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