Editorial Articles

Volume-35, 25 November-1 December, 2017

Investment in Infrastructure
to Boost Employment Opportunities

Dr Ranjeet Mehta and
Ms Mahalaxmi Vishwanath

Infrastructure is a major sector that propels overall development of the Indian economy. India's economy is big and has been getting bigger. It has been estimated that India will become the world's third largest economy by 2050. The importance of infrastructure for sustained economic development is well recognized. High transaction costs arising from inadequate and inefficient infrastructure can prevent the economy from realising its full growth potential regardless of the progress on other fronts. Physical infrastructure covering transportation, power and communication through its backward and forward linkages facilitates growth, social infrastructure including water supply, sanitation, sewage disposal, education and health, which are in the nature of primary services and has a direct impact on the quality of life. The performance of infrastructure is largely a reflection of the performance of the economy. Infrastructure industries are measured by six key infrastructure and core industries (i.e., electricity, crude oil, petroleum refinery products, coal, steel and cement).
Liberalisation of government regulations and a deliberate strategy on the part of the Indian Government to promote infrastructure spells huge opportunity for all. Nearly all of the infrastructure sectors present excellent opportunities, with roads and highways, ports and airports, railways and power standing out as particular bright spots, with staggering sums of investment planned. The prospects for India's roads sector have brightened with new project awards and fewer stranded assets. Regulatory changes and greater government spending have helped revive the sector in last three years.  Faster clearances and dispute resolution, last mile funding and easier exits for companies are among steps taken by the Modi Government to help the sector since it came to power in May 2014. With the Government permitting 100% FDI in the road sector, several foreign companies have formed partnerships with Indian players to capitalise on the sector's growth. The Indian infrastructure sector offers massive investment opportunities to the tune of about Rs.28.2 trillion in coming years. The government has cleared several project proposals and offered a one-time capital infusion to revive those short of funds including  hybrid annuity model, where it commits up to 40% of the project cost.
Bharatmala and Other Infrastructure Projects
The Union Cabinet on 24th October, 2017,  approved an outlay of Rs 6.92 trillion for building 83,677km road network over the next five years. The largest ever outlay for road construction comes in the backdrop of the Modi Government implementing the Goods and Services Tax (GST) which aims to create a common market by dismantling inter-state tariff barriers. A robust road infrastructure will help in that direction.
The road construction push includes the Bharatmala Pariyojana with a Rs 5.35 trillion investment to construct 34,800km of roads. In addition, Rs1.57 trillion will be spent on the construction of 48,877km of roads by the National Highway Authority of India (NHAI).
Bharatmala includes economic corridors of around 9,000 km, inter-corridor and feeder routes of around 6,000 km, 5,000 km roads under the National Corridors Efficiency Program, border and international connectivity roads of around 2,000 km, coastal and port connectivity roads of around 2,000 km, expressways of around 800 km and 10,000 km of NHDP roads. The total length in phase 1 comes to around 34,800 km.
Bharatmala project will start in Gujarat and Rajasthan, followed by Punjab and subsequently traversing the Himalayan belt through Jammu and Kashmir, Himachal Pradesh, Uttarakhand, parts of Uttar Pradesh, Bihar, West Bengal, Sikkim, Assam, Arunachal Pradesh, Manipur and then to Mizoram. Northeastern states have been given special focus in the project and international trade is a key aspect as well.
It is expected that the Bharatmala will bring down logistics cost, impacting exports and investment. Government's marquee Bharatmala scheme will create 100 million man-days of jobs during the construction phase and 22 million permanent jobs due to the increased economic activity triggered by it. The government expects the road construction programme in pipeline  including Bharatmala  will generate 142 million man-days of jobs. The huge spending on infrastructure  will give a fillip to private sector investment. It is expected that these  measures will boost infra spending in a big way.
Bharatmala will not only boost the economic activity but the number of road accident deaths will reduce. According to the Ministry of Road Transport and Highways, a combination of factors such as human error, road defects, manufacturing defects in vehicles and worsening traffic congestions is raising the level of human vulnerability to accidents.
Apart from Bharatmala, some other announcements that would improve infrastructure, boost investments and generate employment in the sector are as follows:
*Around 25 railway stations are expected to be awarded during 2017-18 for redevelopment. On the other hand, 500 stations will be made differently-abled friendly by providing elevators and escalators.
*About 7,000 railway stations will be provided solar power in the medium-term. The work in this regard has already started for 300 stations.
*A new Metro Rail Policy will be announced with a focus on innovative models of implementation and financing, as well as standardisation and indigenisation of hardware and software. This is expected to facilitate greater private participation and investment in construction and operation.
*The Budget allocation for highways has been increased from Rs 57,976 crore in  2016-17 to Rs 64,900 crore in 2017-18.
*To facilitate better connectivity with ports and remote villages, 2,000 kms of coastal connectivity roads have been identified for construction and development.
*The Finance Minister has announced that a specific programme for the development of multi-modal logistics parks will be drawn up.
*Select airports in Tier-II cities will be taken up for operation and maintenance in the PPP (public private partnership) mode. To facilitate effective monetisation of land, the Airports Authority of India Act will be amended and the resources will be utilised for airport upgrade.
*The FM has announced a grant of Rs 2,41,387 crore for transportation in 2017-18. This magnitude of investment will spur a huge amount of economic activity across the country and create more job opportunities.
These steps will provide a positive push to the infrastructure segment in the economy. Mobilizing large quantum of funds required, especially from the private sector, would be vital for the successful implementation of these projects. This Infrastructure plan will contribute 2-3 percent to the GDP.  Roads built under India's ambitious Bharatmala programme will increase vehicle travelling speed by around 20-25%, thereby helping reduce logistics costs. This in turn would help reduce India's supply chain cost to 6% from the present levels of 18% and will create 2 lakh crore jobs as per Mr  Gadkari Union Minister of Ministry for Road Transport, Highways and Shipping, and Water Resources, River Development and Ganga Rejuvenation.
Government has taken action such as integrated policy, capacity-building, partnerships, information and data on infrastructure, and engagement of relevant stakeholders.  Multi-stakeholder engagement is  supported, with a focus on development banks and the private sector.  An evidence-based approach will be instrumental to support policy evaluation.  Government of India  is creating sustainable, inclusive and equitable infrastructure and industrialization across the three dimensions of sustainable development - Economic, Social and Environmental. This will lead to the real progress towards creating  resilient Infrastructure  in India.
(Dr Ranjeet Mehta is Principal Director, PHD Chamber of Commerce and Industry, New Delhi and Ms Mahalaxmi Vishwanath is Post Graduate Student of Public Policy, at Mount Carmel College, 
Bangalore. e-mail : ranjeetmehta@gmail.com)
Views expressed are personal.
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