Monday, December 20, 2010

21st century India hitting 20th century roadblocks

The announcement that the Planning Commission envisions spending 4500 crore ($1 trillion) in the 12th Plan (the period from 2012-2017) on basic civic infrastructure – roads, airports, ports, power plants – comes as welcome news to citizens who encounter the early 20th century every time they step out of their houses and attempt to drive or fly or flip a light switch and to investors attempting to set up shop here. The RBI plans to assist by developing a strong corporate bond market for infrastructure financing. Infrastructure is key to propelling Indian growth into the double digits. What the Planning Commission is promising here is effectively a "Marshall Plan"-scale effort to reduce the infrastructure deficit while providing collateral benefits. The spending will not only boost growth and reduce inflation (as transport costs will go down) but will also result in the creation of millions of new jobs and new businesses. (Tip: Investing in global infrastructure majors – cement, steel, construction – might be worthwhile at this time as this Indian spending bonanza boosts these sectors worldwide).

The problems with Indian infrastructure are many since the country has underinvested in this area for the last 60 years. Just one 5-Year Plan is unlikely to fix everything, but it should improve things.

Here in Mumbai, while we do get 24 hour electricity unlike the rest of India, other infrastructure is severely lacking. Roads are choked with millions of new vehicles as everyone, from dhobis and maids to the fisherwomen, buys new cars, scooters and motorcycles with their new-found money. Road development and public transport is lagging far behind. The new rapid-transit metro lines are behind schedule – the Versova-Andheri-Ghatkopar phase is now expected to run its first train end of 2011! And the other phases are still having their precise routes decided, and haven't even started with the land acquisition and environmental clearances. In the meantime, everyone's pouring out onto the streets in their scooties and cars and going every which way whenever they find a stretch of road. Roads are cemented these days and they tend to last for many monsoons, but the old ones which are still essentially just a splattering of tar are more pothole than road and provide an experience in bone rearrangement as one gets jostled around while the vehicle stumbles over the tar splatterings.

Airports are chock-a-block too, as Laloo's promise of high-speed-rail in India hasn't materialized and so everyone's flying instead. Even the new airports being built all over are expected to run out of capacity within 5 years! Landing into Mumbai these days means an hour or so of cycling overhead waiting for landing slot – the airport is choking under the deluge. And the number of gates and capacity of the airport buildings is woefully inadequate as well. Massive improvements needed here. In order to distribute the passenger load, the railways would do well to compete better as well. High-speed-rail would be a great environmentally-friendly way of transport for the new India. Imagine covering the 1180 km from Mumbai to Delhi in under 5 hours without the hassle associated with flying! Or doing the 3600 km from Srinagar to Kanyakumari in less than a day. China is planning a pan-Asian high-speed-rail network to improve connectivity and trade and is hoping to rope India in (news item). Essentially trains would run from Mumbai to Shanghai via Thailand and Indochina. Getting on board this project would benefit India a lot. But it needs a domestic network in parallel.

Finally, the story of power in India is a sad one. We're one of the most power-deficient countries in the world. All of India, aside from metropolitan regions like Mumbai, see at least a day of blackouts and brownouts every single week. The loss in productivity and GDP is unimaginable. India is literally dying of thirst for power. There are both economic and geopolitical risks associated with foreign oil (gas pipelines going through places like Pakistan and Afghanistan can be blown up by Islamic radicals, oil prices are highly volatile). Solar, wind and nuclear power are the safe clean alternatives that reduce dependence on foreign oil and are environmentally friendly (the pollution in India these days is a common concern and one needs no advocacy for environmentalism in this country today). The plans for augmenting nuclear power in particular are very bold. Today, India is not a pariah in nuclear trade. We have pacts with the US, France, Russia and other countries and this is an extremely promising area. France has 70% of its power coming from nuclear, and consequently has the best air quality in Europe. India would do well to follow this example. The Jaitapur protests are a pointer that the concerns of the local population will need to be addressed before the country builds these plants all over willy-nilly.

India is somewhat where China was 10 years ago. It had a severe infrastructure deficit that threatened growth. It launched a massive infrastructure drive that launched the country into double-digit overdrive. While India has many more challenges when it comes to infrastructure development, due to the democratic nature of decision-making and planning in our country, it is refreshing to see infrastructure getting this kind of attention at last after decades of neglect and one hopes the Plan will be able to achieve at least part of its vision over the next five years.

3 comments:

  1. Hi my name is Jay and im the author of www.jaysworldbanknotes.blogspot.com

    In October you commented on my post concerning Polymer banknotes for India. It is said that the 5 and 10 Rupee banknotes will be released sooon, but do you know if they will be in polymer after all?

    ReplyDelete
  2. Hey Jay,

    Yea, nothing has been heard of the polymer banknote plan since. It was just ₹10 notes. I heard there was a scandal concerning kickbacks by the Australian banknote company that was bribing countries to switch to polymer in order to propagate their polymer note business. So there may be an internal enquiry about this or something, but no news since I posted http://theweirdindian.blogspot.com/2010/10/reserver-bank-of-india-to-issue-10-10.html.

    ReplyDelete
  3. Yea, nothing has been heard of the polymer banknote plan since. It was just ₹10 notes. I heard there was a scandal concerning kickbacks by the Australian banknote company that was bribing countries to switch to polymer in order to propagate their polymer note business. So there may be an internal enquiry about this or something, but no news since I posted http://theweirdindian.blogspot.com/2010/10/reserver-bank-of-india-to-issue-10-10.html.

    ReplyDelete