Infrastructure fix: Finding the will, funds to achieve it

India requires to build infrastructure on a priority to both supercharge its economy and pull millions out of penury

In the Union Budget Finance Minister Arun Jaitley doled out funds for some major infrastructure projects, mainly announcing a dramatic increase in Mumbai’s suburban train network and the development of a suburban train system in Bengaluru. New roads are being constructed as part of the ‘Bharatmala’ project and the ambitious coastal ‘Sagarmala’ system carries on. Yet, the problem is that India needed a lot of these construction projects yesterday. Many Indian cities are choked as roads are clogged coupled with haphazard public transportation systems what are unable to cope. Travelling to and from work therefore can be a truly life-threatening experience on roads handling more cars than they’re designed to and our suburban train systems are deadly, a fact that is borne out by the statistic that over five people die on the Mumbai suburban train system daily.

Most of India is trying to operate as a 21st century economy with early-20th century infrastructure. Even where the public-transport infrastructure is modern such as in Delhi, last-mile connectivity often involved a pedal-rickshaw or unsafe electric rickshaw. And of course, there is the complete and total non-enforcement of traffic laws which makes any travel on Indian roads a hair-raising experience for the uninitiated. The Government has been talking about how they intend to overhaul everything in the coming decade with talk of all electric car sales by 2030 with almost no infrastructure being built out until today. At least on the electric car fleet there has been some progress thanks to the Government. Energy Efficiency Services Limited, a joint—venture of four Centrally-owned power companies, has started operating some electric-powered vehicles on behalf of Central Government agencies and ministries. Yet, the solution inside cities is clearly not more cars but more public transport. But much like for highways, higher usage charges cannot be the solution in a low-income nation if people are to get off private vehicles.

A bizarre double-increase in metro fares might raise more money for the Delhi Metro but it had a dramatic negative impact on daily users. In under two decades, the Delhi Metro has become the lifeline of the city but the fare increase should be a case study for other metro systems across the country. It is imperative for Indian cities to transport workers efficiently from the outskirts to commercial and industrial areas and fare increases alongside low real salaries, as is evident in the low number of income tax payers, don’t help. The cost of fares should be kept low, as China has done across Metro systems such as Beijing and Shanghai. This has encouraged usage and although the systems are very crowded this has played a role in those two cities become global powerhouses of finance and industry.

And it is not just a problem inside Indian cities. Despite modernisation, the Indian Railways has fallen behind. In China over the past two decades they have built hundreds of thousands of kilometers of new expressways and over twenty thousand kilometers of high speed rail networks. In India however, with the politics of povertarianism dominating the discourse, building infrastructure and investing in assets is seen as being pro-business and pro-rich. For example, politicians derailed the eviction of illegal slums around Mumbai Airport, as a result of which the airport has not been able to expand and is saddled without parallel runways with the airport running at capacity. Similarly, politics and activists tried hard to derail the Navi Mumbai airport project as well. These have dealt a hard blow to Mumbai’s economic expansion. In China the authorities managed to supercharge development because they realised the overall economy would grow.

 Tragically, the Congress party now led by Rahul Gandhi did deal a deathblow to one of Narendra Modi’s earliest planned reforms, changes to the Land Act. Even as land prices have fallen after a collapse in the real estate sector, the costs of developing infrastructure have risen dramatically over the past two decades, and with sometimes huge amounts of gold-plating to line pockets. Many of these developers were no better than Vijay Mallya just less flamboyant. This is the price of democracy some argue, as the Bharatiya Janata Party was little better and many of the greedy infrastructure development companies have close ties to both national parties as well as major regional parties.

It is going to be an interesting challenge for the Government to keep the overall costs of developing the infrastructure low given how costs have increased, as well as ensuring adequate land acquisition. And given the lack of investment and difficulty raising funds for private companies, the previous model of private-public partnership in projects may not attract the levels of interest from a decade ago. And with the Modi Government’s focus on the social sector with massive projects such as the recently introduced healthcare scheme, money is the biggest challenge. Of course, roads, railways, airports and metros are being built and public financing of projects is needed as the massive capital expenditure on some projects coupled with the need for public infrastructure and less of a motivation to generate massive revenues are pivotal aspects of infrastructure building. After all, isn’t the development of infrastructure why we pay taxes?

But here is the conundrum. To generate more money from taxes to build infrastructure, the Government has to make India a more attractive destination for investors and frankly with a high-tax environment for individuals, companies and even on indirect taxes, India is not the destination it should be. Yes, there are hundreds of millions of poor people in India and dragging this huge mass of people out of poverty or lower incomes is what will define this Government and its successors. A failure to take all of India along the developmental path will doom this country. Wealth inequality is a major problem, but the solution is not the redistribution model, which has failed again and again in this nation.

This is a chicken and egg situation. If you build the infrastructure, they will come. That was China’s motto anyway as they clearly realised that the egg came before the chicken. India has to go down the same path. We have to redouble our efforts to build and operate affordable and modern physical infrastructure in this country. We need more roads, railways, airports, ports and public transport now. Social schemes might get the headlines but will do nothing to get people out of penury.

(The writer is Managing Editor, The Pioneer)