Infrastructure woes pulling India's growth story

By Kukil Bora, SiliconIndia   |   Thursday, 31 March 2011, 01:20 Hrs
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Infrastructure woes pulling India's growth story
Bangalore: Considering sites of expansion or outsourcing, both India and China are often compared by western executives in the same breath. But the reality of situation has a completely different picture to present. In terms of infrastructure, India is decades behind than China. This lack of ample infrastructure has turned into one of India's most serious problems, as everything from roads to power supplies fail to keep pace with an expanding economy.

Similar to China, India is also a large country. There are some sections in the country that are more developed than others. This is the reason why major destinations like Bangalore or Delhi need to be considered separately from some remote province in central India. All these remote places are facing serious infrastructure challenges like crumbling roads and power blackouts that are hobbling the growth of the nation as a whole.

One of the most obvious signs of lagging infrastructure development of India is its overstressed power grid. In India, power failures can be expected daily, even in the most developed areas of Delhi, Mumbai and Bangalore. In India, any respectable business maintains a diesel generator. The shopping malls and call centres are built atop huge storage tanks of fuel. There are some industrial parks that provide nonstop power through shared generators and charge a premium for that. This is something that may not be as good a deal for large factories.

As the middle-class becomes wealthy enough to afford air conditioners and run them around the clock, one thing is quite obvious that the nation's use of electricity per capita will surely expand. It is estimated that Due to between increased consumer demand and new industrial projects, over a hundred gigawatts of new power capacity are needed by 2012, of which almost 29 gigawatts are now under construction. How is the situation going to improve then? This is a question that can't be answered straight away.

A look at India's urban infrastructure will give us a clear picture of poor and overcrowded public transport, jam-packed roads, inadequate water and sewage systems, and uncollected solid waste. And because of the economic boom, resulting in a significant increase in urbanisation, this situation is even at risk of worsening.

Various factors are indicating that India will suffer severe shortages of freshwater in the years to come. As the poor majority of India's population rises to the level of running water (drinking water for everyone by 2015, as another political campaign goal), freshwater usage will spike.

India's Human Development Index score, weighed down by poor healthcare indicators is however a poor 0.519, ranking India at 119 out of 169 countries just ahead of Timor-Leste and Swaziland. The country has just 60 doctors per 100,000 population and 130 nurses per 100,000 population against world averages of 140 and 280 respectively. Moreover, India has just 90 beds per 100,000 population against a world average of 270 beds. These are reasons for which India's healthcare infrastructure is inadequate to meet the burden of disease.

The situation is not better even outside the cities. Since the economy of rural India still lagging, the development of rural infrastructure is very important to overcome this inequality. A good infrastructure network can be very helpful not only in providing basic services like clean drinking water and electricity, but it also helps to create income-generating opportunities in agriculture. In India, where agriculture generates 20 percent of GDP, improving rural infrastructure can surely make a difference.

Investments in infrastructure have a long-term horizon, and therefore, the need for political continuity and stability is a vital concern. Very often, it is the lack of political stability that holds back necessary investment. Another obstacle blocking a more rapid development of India's infrastructure is that the expansion plans of public companies are chronically underfunded.

According to high-powered expert committee (HPEC) on urban infrastructure led by economist Isher Judge Ahluwalia, India needs an investment of Rs 39.2 trillion in infrastructure over the next 20 years as well as 'major administrative reforms' to cope with the current rate of urbanization.

Earlier this month, Finance Minister Pranab Mukherjee allocated 12.14 trillion to be spent on infrastructure for 2011-12 in the annual budget, a 23.3 percent increase over the current fiscal year, and projected a 40.99 trillion investment for infrastructure development during the 12th Plan.

Will financing the large sums will serve the need? No. Financing infrastructure projects is only half the battle. Governance is the most crucial aspect which needs to be repaired to bring about the desired outcome. Financing requires meeting the investment needs. And it depends on the reform of institutions, as well as the capability of those who run the institutions for service delivery.

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