The big push to make India a manufacturing hub through Make in India, Assemble in India and Atmanirbhar Bharat aims to lay the foundation of a competitive economy. One of the major ingredients along with policy reforms and ease of doing business that matters to overall competitiveness and productivity-led growth is the availability of quality infrastructure, which reduces trade and transaction costs and improves factor productivity. In recent years, there have been efforts for infrastructure development which include higher budgetary allocations and policy reforms to attract private investment. Some of the mega initiatives include the Sagarmala and Bharatmala projects, the establishment of the National Investment and Infrastructure Fund, revisiting Public Private Partnership (PPP) models on the lines of the Kelkar Committee recommendations, securing the independence of regulators, and protection of private investment. However, the infrastructure sector has been hamstrung by an increase in the supply-demand gap, inadequate investment, increasing dependence on the private sector, and an underdeveloped financial sector.
India has seen considerable improvement in infrastructure in the recent past. However, the project to make the country a five trillion economy with an enhanced share of manufacturing in GDP has been constrained by its infrastructural limitations. According to the World Economic Forum’s Global Competitiveness Report 2019, India was ranked 70th, on infrastructural parameters, lower not only than China (36th) but also some other key peer Asian economies like Malaysia and South Korea. India’s situation looks even worse with regard to utility infrastructure. On this parameter, India’s rank was 103rd which was inferior not only to China (which ranked 65th), South Korea and Malaysia, but also to Indonesia (89th), Thailand (90th) and Vietnam (87th).
One of the major problems of infrastructure development is the lack of synergy among different infrastructure sectors, ministries and departments leading to cost and time overruns, and sub-optimal use of resources. A recent report (‘FM pulls up infra ministries for “sluggish” capex, says public spending key to recovery’, IE, December 18) showed that in the first seven months of the current fiscal, capital expenditure was 45.7 per cent of the budget estimate, indicating sluggishness spending in most key infrastructure ministries. Timely public capex is necessary to revive the economy, particularly when private investment in infrastructure is yet to pick up.
Infrastructure projects need clearance and approval from different ministries and departments where timely coordination is paramount. In this context, Gati Shakti — an ambitious national master plan for multi-modal connectivity — is a big step forward. It provides an integrated and centralised high-tech platform for designing and executing infrastructure projects undertaken by multiple government agencies throughout the country.
The mega plan incorporates all infrastructure initiatives — Bharatmala, Sagarmala, UDAN, inland waterways, and dry/land ports — of various ministries and state governments and brings together 16 key central ministries, including railways, roads and highways, petroleum and gas, power, telecom, shipping and aviation, under one digital platform for integrated planning and coordinated implementation. The planned multi-modal connectivity of key economic zones such as agriculture, fishing clusters, electronic parks, textile and pharmaceutical clusters, industrial and defence corridors will ensure the seamless movement of goods and people across the country resulting in much-needed improvement in logistics efficiency and cost competitiveness. Gati Shakti is likely to help in realising the goal of the proposed national logistics policy. The Draft National Logistics Policy (2019) aims to reduce the logistics cost from 13-14 per cent to 10 per cent.
There has been a continuous and significant increase in infrastructure investments over the last few years. Some key initiatives such as Bharatmala, for the expansion and improvement in the quality of the road network, Sagarmala, to modernise port and inland waterways, UDAN to augment air connectivity, are being implemented not only to fill gaps in the country’s logistics infrastructure but also to have a transformative impact on economic competitiveness. There are also mega industrial corridors at different levels of development such as the Delhi-Mumbai Industrial Corridor (DMIC), the Bengaluru-Mumbai Economic Corridor (BMEC), the Chennai-Bengaluru Industrial Corridor (CBIC), and others with the sole objective of improving the industrial infrastructure and augmenting manufacturing competitiveness. Among these, DMIC, which covers seven states, is the most important mega-infrastructure project with a Dedicated Freight Corridor of 1,504 km as its backbone. In addition, there is a National Infrastructure Pipeline in place to facilitate the creation of world-class infrastructure in the country. It covers both economic and social infrastructure projects and envisages an investment amount of Rs 111 lakh crore in infrastructure during 2020-2025.
Despite all these efforts, progress of the infrastructure sector is constrained due to a lack of coordination among various ministries and departments which generally work in silos. This is mainly because the infrastructure sector falls under various ministries and departments which have their own priorities. This array of stakeholders leads to a multiplicity of approvals and delay in clearances which in turn overruns in time and cost of projects. Since the primary focus of Gati Shakti is to put all the stakeholders under one framework with a common vision it is hoped that this high-tech mega plan will speed up the completion of infrastructure projects and help the country to achieve the target of a five trillion economy by 2025.
This column first appeared in the print edition on December 21, 2021 under the title ‘A bigger step forward’. Sahoo is Professor, Institute of Economic Growth and Rai is Fellow, Indian Council for Research on International Economic Relations
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