India's infrastructure journey: A data-driven perspective on growth, gaps

Tarmac to Towers: The India Infrastructure Story  

Author: Pratap Padode

Publisher: Westland Business

Pages:  373 

Price: Rs 799

  Pratap Padode is a financial journalist and publisher of Construction Update,  a magazine launched in 1996, followed by Infrastructure Today, Power Today and Project Reporter. This book comes favourably pre-reviewed by industry veterans Nandan Nilekani, founder chairman, Unique Identification Authority of India, S N Subrahmanyan, Chairman, Larsen & Toubro, and policy maestro Amitabh Kant, the Prime Minister’s G20 Sherpa.

 

It stands out in the literature on infrastructure for two reasons. First, it is an industry veteran’s perspective on the domestic political economy, global drivers, and the industry response that shaped infrastructure from 1995 to 2024. Second, it is data-heavy, which readers unacquainted with this sector might welcome. It also touches on macro-policy issues that impact infrastructure.

 

Chapter two extends to more than one half of the book. It is a monthly narration of key events and decisions from 2012 onwards, based on the author’s editorials in trade magazines — a primer on how infrastructure evolved and the government’s supportive initiatives, including the India Infrastructure Finance Company (IIFCL), constituted in 2006, to provide long-term debt, and the India Infrastructure Project Development Fund in 2007 to partially finance the considerable documentation cost of projects under the public-private partnership (PPP) model.

 

Read together, chapters one and two provide, in the author’s words, “a ringside view” of the “halcyon days of growth to the logjam and policy paralysis reached in 2012”, and thereafter “reinjection of fuel by Prime Minister Narendra Modi.”  India’s infrastructure story became globally visible in 1998 when then Prime Minister Atal Bihari Vajpayee announced the Golden Quadrilateral — more a vision than a project — to link the country’s urban extremities in all four directions with highways. The length of four-lane highways increased from just 556 km in 1998 to 14,000 km by 2007, funded partially by a new cess on the sale of petrol and diesel — an appropriate new revenue source borne by owners and users of motor vehicles who benefitted directly from lower fuel consumption and maintenance costs due to road improvement and widening, as did industry and trade from better connectivity.

 

Chapter three examines why “the pace (of development) is elusive” and annual cost overruns on projects are ~4 trillion, making private investment shy of new commitments. The exception is India’s demonstrated prowess in digital public infrastructure and applications for identity recognition, payments, information-sharing and digital storage stacks, which are expected to find markets in developing economies. These are the stepping stones to feed data-hungry artificial intelligence sub-systems.

 

Indian Railways has yet to live up to being the fourth largest global network by enhancing the quality of its services. Energy- and emissions-inefficient road transport still accounts for a disproportionate share of passenger traffic and freight, though new investments in ports and dedicated freight corridors are nearing completion. The glacial pace in the privatisation of public enterprises shrinks the space for private business, exaggerating the drain on public finances. The Smart Cities mission has yet to transform city planning mechanisms in states where shortage of urban planners, skilled, certified and registered construction workers and contractors, constrain small projects. L&T, one of the few Indian professionally managed companies, remains the dominant engineering and construction company with a turnover 4 times of the next company, illustrating that the scale of investment must expand significantly to provide more room for other corporations to grow and to attract foreign competition.

 

The last chapter, titled “Fast Forward to Viksit Bharat,” is expansive, delving into 15 suggested transformative changes. Some are a mite distracting from the narrower issue of why India does not excel at infrastructure development and how to improve it. Examples are the suggestion to jettison gross domestic product (GDP) for measuring development and adopt multiple dimensional indices instead, or the need to enhance women’s participation in the workforce — both needed but unlikely to boost infrastructure. Others are wishful, such as actualising cooperative and competitive federalism. The political economy barriers can only be overcome by devising new institutional mechanisms for power sharing in key decision-making bodies that face political economy barriers. Decentralisation is generally desirable for revenue diversification but could negatively impact projects via inter-governmental friction.

 

Some of the suggestions are spot on, such as evolving a new strategy at scale for vocational training, improving access to technology for medium and small enterprises, boosting tourism to enhance demand for construction and services, reducing the upfront public finance project commitment by adopting the Andhra model of “land pooling” and the need to reduce construction risk via contracts compliant with international standards, such as those of FIDIC, a Switzerland-based international federation.

 

This book is recommended for its data-based insights into the problems and prospects of infrastructure development. One inexplicable exclusion is a discussion on the unimplemented recommendations of the Kelkar Committee Report of November 2015 on the PPP model of infrastructure development. The public investment demands of the green energy transition and defence preparedness are likely to overshoot the sustainable level of public finance available. Enhancing private domestic and foreign investment via PPPs could fill that gap and induce the next phase of cost-effective high infrastructure growth.

 

The reviewer is consultant, economic governance & energy regulation