The difference between where we are and where we want to go is what we do. Keeping in mind, the threshold at which India stands right now and the juncture at which India envisions to be, the importance of need for quality and efficient infrastructural development cannot be overstated.

More production needs more factories to be set up. More factories need stable power supply to run efficiently. The produce from these factories need good transport facilities to reach the end consumer and the end consumer with global aspirations needs power, clean water, telecommunication and effective transport. The farmer needs irrigation and storage facilities and the medical industry needs more beds. The need is rampant among all sectors.

As such, infrastructural development is directly linked with economic growth and economic growth with other developmental indicators. Growth is needed to combat unemployment, alleviate poverty and maintain socio-political stability.

The various initiatives of the current government like Make in India, Digital India and Smart Cities, to steer India on a growth trajectory, are completely dependent on rapid infrastructure development.

At the 71st UNESCAP Session, Commerce Minister Nirmala Sitharaman said India needs investment of about $ 1 trillion in new infrastructure over the next few years. This number indicates the massive need for infrastructure if Narendra Modi has live up to his promise to spur economic growth.

One of the examples of a large planned infrastructure development is the Delhi-Mumbai Industrial Corridor, envisaged to accommodate large industrial zones, development of smart cities and creation of logistics network. Opportunities are also expected to arise in the area of urban infrastructure development, such as large urban transport and water supply projects in urban cities, driven by the rapid pace of urbanization. It is estimated that more than 590 million people will reside in urban areas by 2030 and could account for 70 percent of Indian GDP (McKinsey Report)

But what’s keeping India from raising this investment. The bottleneck can be captured in a single index: The Ease of Doing Business. Ranking a woeful 142 of 189 countries, India is not the most ideal place for the investors to put their money in.

However, let’s see a step by step break-down to see what is happening.

Some of the key issues plaguing the sector are:
1. Land acquisition and environmental clearance: Acquiring these is cumbersome. Even with right of way given to the businesses, the negotiations process of land acquisition is tedious and not always fruitful. The process of getting an environmental clearance is mauled with red-tape and bureaucracy.

  1. Lack of coordination between various Government agencies: Even with requisite clearances, the lack of coordination between various government agencies result in delays and sometimes shutting down of projects leading to wasteful expenditure. This is one of the main reasons why investors are cautious of putting their money on India.
  2. Inappropriate structuring of the projects, particularly of demarcation of risks and rewards between Government and private sector: One of the popular ways to raise money to finance a project has emerged to be Public-Private Partnership or PPP. As the risk is divided between the government and the private sector, this was destined to take off. However, because of Inappropriate structuring of the projects, this also is looked upon with caution.
  3. Lack of a proper dispute resolution mechanism between private players and government agencies: Carrying forward the above point, this is a point of contention as well.
  4. Debt burden of infrastructure developers, as a consequence of execution delays and irrational bidding: Since the projects are massive and capital intensive, the funding is mostly done through raising debt. The above points coupled with the looming threat of repayment of debt have led to investment problems.

India Inc. though has recognized the above issues and is taking steady steps to tackle them.

There is a need for decisive action and support over the following four broad areas:

  1. Reduction of regulatory uncertainty and delays – Single Window Clearance is being promoted by the government to attract investors.
  2. Appropriate Structuring of projects
  • Developing financing mechanisms to suit the sector’s needs
  1. Efficient project management (from bid to execution)

India needs to develop its infrastructure to meet the demands of the growing population and their growing aspirations. The journey from the tag of developing to developed hangs in the balance and quality infrastructure is the way to provide solid support to the hinge.

 

References

http://projectvendor.com/infrastructure-sector-india-past-present-future/

 

http://www.sustainabilityoutlook.in/content/infrastructure-development-india-transition-making-464461

 

http://articles.economictimes.indiatimes.com/2015-05-28/news/62765618_1_asia-pacific-asia-pacific-new-infrastructurehttp://blogs.cfainstitute.org/investor/2015/01/26/indias-infrastructure-investments-huge-opportunities-but-no-

takers/http://www.livemint.com/Opinion/3YpBrQ1Fc9Yk7zlVEImblL/How-to-bridge-Indias-infrastructure-gap.html

http://www.pwc.com/gx/en/capital-projects-infrastructure/infrastructure-investment-growth-in-india.jhtml

Tanvi Binani

Tanvi is a student at SSCBS, DU. The views expressed are based upon the analysis and research that the writer did on the topic from various books, reports and web articles.  The writer regularly writes for Corporate Monks as a research associate. The writer takes personal responsibility for the ownership of the content shared and incase some sources have not been given credit, you can directly mail the writer at-binanitanvi@gmail.com

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