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RSTV: THE BIG PICTURE- STRENGTHENING INDIA’S INFRASTRUCTURE


RSTV: THE BIG PICTURE- STRENGTHENING INDIA’S INFRASTRUCTURE


Introduction:

            In line with its election promise of Rs 100 trillion investment in the infrastructure sector by 2024, the NDA government would be targeting low-hanging fruits, such as Metro projects, inland waterways, natural gas grids and airport privatisation, to give a fillip to private sector investment in the first few months of its tenure. Getting private sector back in a big way would be the topmost priority since the government has a limited fiscal headroom. Fitch said in a May 24 report that reducing general government debt to 60 per cent of the GDP ceiling by FY25, from the rating agency’s 68.8 per cent of the GDP in FY19 would require a significant deficit reduction of about 0.5 per cent of GDP annually. The government’s own budgetary support would, therefore, be largely limited to creating infrastructure support for agriculture, IT in education and digital networks for its social outreach programmes. The road sector, however, would have to continue to depend on borrowings and budgetary resources, like the railways. The last five years have seen massive spending in roads, railways, water, irrigation and urban infrastructure.

 

Why Infrastructure Development is necessary?

  • For a massive country such as India, improvement in infrastructure is a necessity.
  • Target of 5 trillion economy.
  • Infrastructure development will generate growth, employment and pull people out of poverty.
  • Infrastructure development will benefit Government’s Ease of Doing Business.
  • Developing Renewable Energy sector will help in mitigating climate
  • Infrastructure investments can also help improve peace and security by enabling, sustaining and enhancing societal living conditions.

 

 

Plethora of incomplete infrastructure projects:

  • Projects are launched without adequate ground preparation regarding the land requirement and project cost.
  • Failure in recovering the investment.
  • Lack of co-operation at the state level, which is a big hurdle since land acquisition is the state’s business.
  • Informality and corruption in infrastructure project delivery and lack of performance pre
  • Environmental clearance delays, protest by the displaced populations and hurdles due to local politics.
  • In some cases tendering process is incomplete or the terms and conditions are unclear.
  • Lack of private sector funding.

 

Government Efforts:

  • With Initiatives such as ‘Housing for All’ and ‘Smart Cities,’ the government is working on reducing the bottlenecks that impede growth in the infrastructure sector.
  • Under UDAY scheme the government has taken steps to improve operational and financial parameters of discoms.
  • The National Highways Authority of India (NHAI) launched Masala Bonds in May 2017, for raising capital for funding the infrastructure projects in India.
  • National Infrastructure Investment Fund (NIIF) with an initial corpus of Rs 40,000 crore.
  • The modernization of Indian Railways has been one of the top priorities of the central government.

 

Some of the key infrastructure sectors.

Green Infrastructure:

  • Infrastructure facilities that are environment-friendly can lead to sustainable development of cities.
  • India will benefit if investments are steered towards green-infrastructure projects.
  • Green bonds can provide a long-term source of debt capital for renewable infrastructure projects.
  • Germany is one country that has been a nest for the innovation and application of green technologies. This can provide a useful lesson for India.

Logistics Sector:

  • The logistics sector needs to be improved because of its impact on improving competitiveness in the economy.
  • Improving logistics sector has huge implication on exports and it is estimated that a 10% decrease in indirect logistics cost can increase 5-8% of exports.

Social Infrastructure:

  • Priority to social infrastructure is stated as essentials to inclusive and sustainable growth.
  • Higher public investment in the social sector, including education and health, is critical for India.
  • Being a developing economy “there is not enough fiscal space” to increase expenditure on critical social infrastructure.
  • India has made significant progress in quantitative indicators such as enrolment levels and physical infrastructure like construction of school buildings, drinking water facilities, toilet, etc.
  • The quality of education also needs to be monitored and assessed.
  • India has been successful in achieving gender parity in the school sector and in higher education it is moving towards a better gender parity.
  • Growing expenditure on health is burdening the public in gen

Ports:

  • India needs to revamp institutional and regulatory environment around ports.
  • Corporatisation of ports is one way of achieving efficient and world class ports by the conversion of major port trusts into truly commercial organisations.
  • In terms of infrastructure, it is important to maintain draft to serve bigger vessels, ensure mechanisation of ports through introduction of new equipment and procedures, build new facilities, upgrade existing facilities and automate systems/procedures.

Transport infrastructure: We need sound public transport infrastructure because if we donot have proper infrastructure we cannot have urbanization

  • At the highest ever pace of construction
  • World-class expressways such as the Eastern Peripheral Expressway and Western Peripheral Expressway.
  • Technologically sound projects which are engineering marvels such as the Dhola-Sadiya Bridge, Chenani Nashri Tunnel and Bogi-Beel bridge.
  • The Bharatmala Pariyojana is unique and unprecedented in terms of its size and design, as is the idea of developing ports as engines of growth under Sagarmala.

 

 

Private Investment: Government alone cannot meet the target because of fiscal consolidation so encouraging private investment is the must

  • National highways remain the only bright spot, where policy actions and the hybrid annuity model (HAM) have revived projects.
  • Toll-operate-transfer (TOT) auction is a great example of asset monetization and crowding-in of private capital.
  • A spike in public spending has offset some of the fall in private investments
  • Private sector participation in infrastructure delivery helps deliver tangible benefits.
  • The private sector has also delivered efficiently—both on project execution as well as operations.
  • Private participation enhances public accountability.
  • Public private partnership (PPPs) bring back trust in public utilities that execute them, improve service delivery and bridge resource gaps.
  • Reviving the stalling private sector investments is crucial to accelerate the infrastructure build-up that India needs, aspires for, and deserves.

 

 

Government Efforts: The Government has taken several steps to encourage investment by private sector like launching of innovative financial vehicles such as

  • Massive investment has been done.
  • Infrastructure Debt Funds
  • Infrastructure Investment Trusts/Real Estate Investment Trusts
  • Framework for issuance of municipal bonds
  • Relaxation in External Commercial Borrowing (ECB) norms.
  • Establishment of National Investment and Infrastructure Fund (NIIF)
  • Relaxation of norms for Employees’ Provident Funds Organization (EPFO)/pension funds for infrastructure sector

 

Infrastructure is a key driver of the overall development of Indian economy. It is seen that investments in infrastructure equal to 1% of GDP will result in GDP growth of at least 2% as infrastructure has a “multiplier effect” on economic growth across sectors. The recent headway made in developing transport infrastructure will prove to be the biggest enabler for growth. An efficient infrastructure is the biggest enabler for growth. India’s growth story should no longer be impeded by a lack of infrastructure, and the fruits of this growth should reach everyone in the remotest part of the country.

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