Faster Than China? India's Road, Rail Drive Could Lay Doubts To Rest

[Srinivas_K]

Faster Than China? India's Road, Rail Drive Could Lay Doubts to Rest

All India | Reuters | Updated: June 01, 2015 19:20 IST

Having roughly doubled spending allocations for roads and bridges in fiscal year 2015-16, and raised the rail budget by a third, Mr Modi is banking on India going faster. (File Photo - Yamuna Expressway)

"Once these measures are implemented, the elephant would start dancing, and with it the overall economy."

Mr Modi's chief economic advisor, Arvind Subramanian, reckons growth could increase by more than one percentage point this year provided ministries don't underspend, though the central bank saw it adding just half-a-point.

Data released on Friday showed the economy grew 7.5 per cent in the quarter ending in March, easily outpacing China. Many economists suspect, however, that the government statisticians' new way of counting GDP overstates how well India is doing.

Those worries might fade if Dr Subramanian is right about the impact infrastructure spending will have on India's under-achieving economy.

Success rests on whether ministries spend the extra $11 billion they were allocated for infrastructure this fiscal year. They got off to a fast start in April, spending $6 billion of the $38 billion capital expenditure budget for 2015-16.

STEPPING UP

The government has prioritised unblocking infrastructure projects that had gathered dust because of either an obstructive bureaucracy, a lack of private sector investment, or in some cases public interest litigation.

Weighed down with heavy debt, and having posted their worst results in five years, big Indian corporates are in little rush to make fresh investments, while public sector banks may require recapitalisation before they are ready to lend the sums needed.

That has made the government step up to the plate. Take Delhi's Eastern Peripheral Expressway, for example.

Part of a six-lane ring-road for the capital, the project was first mooted nine years ago but failed to attract private bidders. Unwilling to wait any longer, the road ministry intends spending almost $1 billion building the 135 kilometre loop.

Last month, the cabinet approved a policy that will provide private developers with a $470 million bailout in order to complete 16 highways.

The government has also put $3 billion of seed capital into a new infrastructure fund, with the hope of attracting up to $30 billion of private money.

Some rules have been eased for the private sector, and financially stressed companies are now allowed to exit projects.

And in future, public tenders will only be launched after all approvals have been secured - addressing a major reason why so many projects stalled.

As a result the government hopes road building will accelerate to 30 km a day by the end of next year from 12 km at present, as it plans to award projects for 10,000 km of road this year, up 25 per cent from a year earlier.

Some bureaucrats suspect that the government has underestimated how much money is needed. Planned road projects alone will cost $17 billion this year compared with a budget allocation of about $7 billion. To cover most of the gap, the road ministry plans to raise a $7 billion loan.

"We don't have enough money to build all these roads," Rohit Kumar Singh, a mid-level bureaucrat at the ministry, told Reuters. "We need to leverage private sector funding."

A clear, consistent policy on tolls needs to be put in place for the private sector to become more active, Virendra Mhaiskar, managing director of IRB Infrastructure Developers Ltd, one of India's largest road builders, told Reuters.

"You have to create an environment where investors and lenders can make a return," Mr Mhaiskar said.
http://www.ndtv.com/india-news/fast...ad-rail-drive-could-lay-doubts-to-rest-767544

 

[Abhijat]

Yes, India is on boom path in public infrastruture .

No one can denie the contribution of , good infrastructure , in development of country.

A very interesting chapter in presented in Economic Survey ,

• Putting Public Investment on Track: The Rail Route to Higher Growth

Some interesting points:

• 
  
  
  • The International Monetary Fund (IMF), in the
    World Economic Outlook (October 2014)2, has
    noted that increases in public infrastructure
    investment, if efficiently implemented, affects the
    economy in two ways. In the short run it boosts
    aggregate demand and crowds in private
    investment due to the complementary nature of
    infrastructure services.
  • In the long run, a supply
    side effect also kicks in as the infrastructure built feeds into the productive capacity of the economy.
  • Two prime candidates are rural roads
    and railways.
  • The present government can now do for the
    neglected railways sector what the previous NDA
    government did for rural roads.
  • Conceptually, there is a strong case for channeling
    resources to transport infrastructure in India given
    the widely known spillover effects of transport
    networks to link markets, reduce a variety of costs,
    boost agglomeration economies, and improve the
    competitiveness of the economy, especially
    manufacturing which tends to be logistics-intensive.
  • in 1990 the Chinese rail network of
    about 57,900 route kilometers lagged behind
    India’s 62,211 route kilometers. By 2010, the
    situation was reversed in favour of China with the
    country’s network expanding to over 90,000 route
    kilometers while India’s grew marginally to 64000
    route kilometers.

 

[Srinivas_K]

We need good Infrastructure and we need it quick !

Yes, India is on boom path in public infrastruture .

No one can denie the contribution of , good infrastructure , in development of country.

A very interesting chapter in presented in Economic Survey ,

• Putting Public Investment on Track: The Rail Route to Higher Growth

Some interesting points:

• 
  
  
  • The International Monetary Fund (IMF), in the
    World Economic Outlook (October 2014)2, has
    noted that increases in public infrastructure
    investment, if efficiently implemented, affects the
    economy in two ways. In the short run it boosts
    aggregate demand and crowds in private
    investment due to the complementary nature of
    infrastructure services.
  • In the long run, a supply
    side effect also kicks in as the infrastructure built feeds into the productive capacity of the economy.
  • Two prime candidates are rural roads
    and railways.
  • The present government can now do for the
    neglected railways sector what the previous NDA
    government did for rural roads.
  • Conceptually, there is a strong case for channeling
    resources to transport infrastructure in India given
    the widely known spillover effects of transport
    networks to link markets, reduce a variety of costs,
    boost agglomeration economies, and improve the
    competitiveness of the economy, especially
    manufacturing which tends to be logistics-intensive.
  • in 1990 the Chinese rail network of
    about 57,900 route kilometers lagged behind
    India’s 62,211 route kilometers. By 2010, the
    situation was reversed in favour of China with the
    country’s network expanding to over 90,000 route
    kilometers while India’s grew marginally to 64000
    route kilometers.

 

[Abhijat]

We need good Infrastructure and we need it quick !

Yes , no doubt about it.

On other hand, Central government , in it's capacity , can easily built infrastructure requirement for Railways.

But, on the other hand, road projects tend to be stuck, due to "political" pressure or inadequate provision in PPP models.

So , government , is setting tune for improving clauses in PPP model. Their is very good chapter on it in Economic survey.

But , "political pressure" , how do intended government to deal with it?

 

[Srinivas_K]

Yes , no doubt about it.

On other hand, Central government , in it's capacity , can easily built infrastructure requirement for Railways.

But, on the other hand, road projects tend to be stuck, due to "political" pressure or inadequate provision in PPP models.

So , government , is setting tune for improving clauses in PPP model. Their is very good chapter on it in Economic survey.

But , "political pressure" , how do intended government to deal with it?

I think Modi Govt. can address that, Land acquisition bill should also be passed ASAP.