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Editorial Articles

Volume-16, 21-27 July, 2018

Investment in Infrastructure to Boost Economy & Employment

Dr. S P Sharma

A country's level of human and economic development is closely related to its levels of achievement in infrastructure development. Infrastructure is an important determinant of domestic production capabilities with state of the art rail, road, port, airport, energy, communication, housing and sanitation facilities along with increase in urban development. Enhanced investments in infrastructure sector helps in creating a vibrant economy.
In recent years there is renewed focus on investments in infrastructure sector with increased Public Private Partnerships (PPPs) especially in power and telecom projects with significant improvement in ease of doing business environment such as reforms in issues related to land, environment and forest clearances. The focus has been to fill the infrastructure investment gap by financing from private investments. Apart from structural reforms like Goods and Services Tax, Insolvency and Bankruptcy Code and measures to facilitate Ease of Doing Business, India has performed very well in global rankings which will pave the way for attracting more investments from the global investors in various infrastructural projects going forward.  The infrastructure investment gap is expected to improve significantly in the coming times. As per global ranking of the World Bank's 2017 Logistics Performance, India jumped to 35th rank in 2017 from 54th rank in 2014.
Various reforms undertaken by the Government over the last few years reveal that here has been considerable progress in Roads, Railways, Metro Rail, Shipping, Civil Aviation, Power and Logistics Infrastructure Sectors that is expected to step up the growth momentum in the coming times. Enhanced investment on infrastructure sector will help in creating jobs both directly and indirectly.
Road transport plays a major role both in terms of traffic share and in terms of contribution to the national economy. Road transport facilitates the movement of goods and passengers, as well as plays a key role in promoting equitable socio-economic development across regions of the country. India has one of the largest road networks of over 56.17 lakh km comprising National Highways, Expressways, State Highways, Major District Roads, Other District Roads and Village Roads. In 2001 total road length was 33, 73,520 km with total number of 55 million vehicles on the roads. In 2016, total road length increased to 56, 17,812 km while the total number of motor vehicles grew by four times to 229 million. Going ahead, the Government is connecting habitation with rural roads through the Pradhan Mantri Gram Sadak Yojana (PMGSY), which is a centrally sponsored scheme. The District roads provide the critical function of linkage between main roads and rural roads across the states.
National Highways (NHs)/ Express Ways in India accounted for 2.06 per cent of the total road length. For the last few years the construction of NHs has been accelerated rapidly. Highways in Indian States have a significant impact on trade and per capita income.  Higher the density of National Highways, higher the Interstate Trade as per cent of Gross State Domestic Product.
In order to facilitate implementation of the projects many initiatives have been taken by the Government such as monetization of projects through the Toll-Operate in Transfer model, securitization of toll revenue, adopting the 'Infrastructure Investment Trusts route, other innovative financing options including LIC, Long Term Pension Funds etc., have been taken to attract fresh capital from the market on the strength of already operational projects with proactive policy interventions.
Improvement in key global rankings
S. No. Parameters 2014 2017
1. Ease of Doing Business Index
142nd 100th (2018)
(Out of 189 countries) (Out of 190 countries)
2. Global Retail Development Index
20th 1st
(Out of 30 countries) (Out of 30 countries)
3. Global Competitiveness Index
71st 40th
(Out of 144 countries) (Out of 137 countries)
4. Logistics Performance Index
 54th 35th (2016)
(Out of 160 countries) (Out of 160 countries)
5. Global Innovation Index
 76th 60th
(Out of 143 countries) (Out of 143 countries)
6. Global Gender Gap Index
114th 108th
(Out of 142 countries) (Out of 144 countries)
7. Legatum Prosperity Index
102nd 100th
(Out of 142 countries) (Out of 149 countries)
Source: PHD Research Bureau, PHD Chamber
One of the initiatives taken by government is Bharatmala Pariyojana which is a new umbrella program for the highways sector that focuses on optimizing efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps through effective interventions. The Government has emphasized on railway’s infrastructure development such as dedicated freight corridors, high speed rail, high capacity rolling stock, last mile rail linkages, port connectivity, and attracting private and foreign direct investments, tariff rationalization, classification of new commodities, new policy guideline for station to station rates, expansion of freight basket through containerization.
Since in recent years there has been stiff competition from other modes of transportation so the Government has initiated various transformative measures to keep railways on track. During 2017-18 Indian Railways carried 558.10 million tonnes of revenue earning freight traffic as against 531.23 million tonnes during 2016-17 showing an increase of 5.06 per cent during this period.
Apart from above initiatives, the Government has emphasized on railways infrastructure development. The pace of commissioning Broad Gauge lines and completion of electrification has been accelerated during the last three years.
The capital investment during the last three years has also increased.
Moreover, the commercial development will be undertaken near the stations and will become the nerve centres of the city besides, the redeveloped stations will improve passenger's condition by providing amenities like digital signage, escalators/ elevators, self-ticketing counters, executive lounges, luggage screening machines, walkways, holding areas for passengers, grand and distinctive roofing and flooring, free and paid Wi-Fi etc.
An MOU has been signed by Ministry of Railways with Ministry of Housing and Urban Affairs for integrated planning for station redevelopment projects in cities identified as SMART cities. 10 stations have been taken up for redevelopment under this scheme jointly by Rail Land Development Authority (RLDA) and NBCC (India) Limited.
Station Redevelopment' is one of the  biggest non fare revenue generating project for redeveloping railways stations in the country and has been included in the Harmonized List of Infrastructure Subsectors. The stations to be redeveloped will provide world class amenities and services to passengers. The station redevelopment has been undertaken through various modes such as Zonal Railways, Indian Railway Stations Development Corporation Ltd. (IRSDC), JV with Smart City SPVs, Railway PSU and Co-operation with State Government.
Another area in which Government of India has been working is providing financial assistance to cities for improving public transport including metro rail projects. There are 425 km of metro rail systems operational in the cities of Delhi, NOIDA, Gurugram, Kolkata, Mumbai, Chennai, Bengaluru, Hyderabad, Jaipur, Lucknow and Kochi and another about 684 km are under construction in various cities. 
India is the third largest and the fastest growing domestic aviation market in the world in terms of number of domestic tickets sold. To make flying accessible and affordable for the masses in the regionally important cities, the RCS-UDAN Regional Connectivity Scheme - 'Ude Desh ka Aam Naagrik' (RCS-UDAN) scheme was launched in October 2016.
This is a first-of-its-kind scheme globally to stimulate regional connectivity through a market based mechanism. 27 States/UTs have already signed MOUs with the Central Government. under RCS-UDAN. Many private sector airlines are actively participating under this scheme. Provision of Rs. 4,500 crore for revival of 50 unserved and underserved airports/air strips has been taken up with Government budgetary support and also through liberalization of policy environment.
To encourage the growth of Indian ships, the Government has implemented several measures which include reduction of GST from 18 per cent to 5 per cent on bunker fuel used in Indian flag vessels. In addition, the Government has taken series of initiatives to improve the performance of Major Ports. One of the initiatives is known as Sagarmala Project. It is a flagship programme of the Ministry of Shipping to promote port-led develop-ment in the country through harnessing India's 7,500 km long coastline.
Over the last few years the Indian telecom sector has shown remarkable growth as a result of key reforms like  spectrum management, Bharat Net programme and umbrella scheme like 'Digital India' in order to convert India to a digital economy and a knowledge based society. But at the same time the recent trend has shown that the telecom sector is going through a stress period with growing losses, debt pile, price war, reduced revenue and irrational spectrum costs. Despite various bottlenecks, the Government is extending the reach of telecom network to the remote and rural villages. The Government is implementing the flagship 'Bharat Net' project. This is the largest rural connectivity project of its kind in the world, and is the first pillar of Digital India Programme.
Government is in the process of formulating the New Telecom Policy, targeted to be released in 2018, after holding wide range of consultations with various stakeholders. The major themes that new Telecom Policy shall try to address include Regulatory & Licensing frameworks impacting the sector, Connectivity for All, Quality of Services, among others. Ease of Doing Business and Absorption of New Technologies including 5G and Internet. Telecom Regulatory Authority of India (TRAI) has also recommended new policy on 'Net Neutrality' which prohibits discriminatory tariffs for data services. As per the policy, the service providers should be restricted from entering into any arrangement, agreement, or contract, with any person, natural or legal, that has the effect of discriminatory treatment based on content, sender or receiver, protocols or user equipment. All these policy paradigms would provide lucrative investment opportunities to investors and expansion in employment opportunities going forward.  
At the energy front, the generation capacity of power sector has increased substantially and over the years reached to 330860.6 MW in 2017. Programmes have been taken up to address improvement in performance of distribution companies in order to enhance power supply in rural areas, Deen Dayal Upadhyaya Gram Jyoti Yojana was launched in December 2014 to extend financial assistance for capital expenditure by distribution companies for strengthening and augmenting distribution infrastructure, including  metering, in rural areas. A new scheme, Saubhagya (Pradhan Mantri Sahaj Bijli Har Ghar Yojana), was launched in September 2017 to ensure electrification of all remaining willing households in the country in rural and urban areas
Petroleum and natural gas is one of the crucial areas. Some of the important new initiatives taken to transform hydrocarbon sector in India are complete mapping of sedimentary basins, refining capacity. Government has envisaged developing an additional 15,000 km long pipeline network to have an ecosystem of National Gas Grid in the country.
Government has introduced well targeted system of subsidy delivery to LPG consumers through Pratyaksh Hanstantrit Labh (PAHAL). The other important milestone is launch of Ujjawala Yojana where 5 crore LPG connections are targeted to be provided to BPL families with a support of 1600 per connection by 2018-19. The scheme is aimed at replacing the unclean cooking fuels mostly used in rural India with the clean and more efficient LPG (Liquefied Petroleum Gas).
Logistics sector in India remains unorganized to a large extent. Improving logistics sector will have huge implication on exports and it is estimated that a 10 per cent decrease in indirect logistics cost can increase 5-8 per cent of exports. With the implementation of Goods and Services Tax (GST), the Indian logistics market is expected to grow at a large scale. A new Logistics Division has been created in the Department of Commerce to develop and coordinate integrated development of the logistics sector.
In India today rental housing is considered   to be a vital component for both horizontal and vertical mobility as it allows people to access suitable housing without actually having to buy it. Across the income spectrum, rental housing is an important foothold into a city for new arrivals, until they are able to, or choose to, purchase their own homes. For rural migrants the financial condition is already tied up with land and livestock.  Hence, for them, it is access to shelter that is more important than investing in another asset that is subject to local market risk. However,  the share of rental housing has actually been declining in Indian cities since independence from 54 per cent in 1961 to 28 per cent in 2011. 
Since India's housing requirements are complex but new policies have been mostly focused on building more homes and on home ownership; we need to take a more holistic approach that takes into account rentals and vacancy rates. In turn, this needs policy-makers to pay more attention to contract enforcement, property rights and spatial distribution of housing supply vs. demand.
In a nutshell, it can be attributed that infrastructure development will itself absorb so many skilled, semiskilled and unskilled workforce with the continuation of the pace of reforms. The ease of doing business is expected to improve further in the coming times which will become a more attractive point for global investors to look at India’s growth story for fruitful returns. The infrastructure development would facilitate the economy to become more and more competitive and productive with a strong and sustainable growth trajectory going forward.
(The author is Chief Economist with PHD Chamber of Commerce & Industry, New Delhi) E-mail:spsharma@phdcci.in. Views expressed are personal.