INDIA’S financial and commercial capital faces an identity crisis, as decision-makers and city planners are still not sure how they would like the metropolis to shape up.
While the Maharashtra government, currently headed by Vilasrao Deshmukh of the Congress, wants the city to replicate the ‘Shanghai success story,’ (by demolishing ugly slums and replacing them with glittering commercial complexes) the federal government has even more ambitious plans for it.
P. Chidambaram, the union finance minister, in his budget speech on February 28, visualised Mumbai emerging as the biggest financial hub between London and Tokyo. Far-fetched as the dreams of politicians are, Mumbai’s 15 million residents have over the years learnt to take all these ‘visions’ in their stride. The city’s crumbling infrastructure, combined with the urban decay and rot, make a mockery of all these boasts.
Over half of Mumbai’s population lives in appalling conditions in sprawling slum colonies that have come up over the years on public land. Most of these slum-dwellers contribute significantly to the city’s (and the country’s) economy, but are forced to live in shanties because of lack of affordable and cheap housing.
But instead of addressing these problems – by ensuring planned development in satellite towns, reforming archaic rent control and land use laws and encouraging corporates and financial institutions to develop townships and flood the market with rented flats – governments come up with foolish schemes of demolishing existing homes.
Deshmukh has had to hastily call off his demolition drive, after members of his Congress party – worried over the impact it would have on electoral politics – complained to party president Sonia Gandhi. The only beneficiaries of such demolition drives are the slumlords, who manage to rebuild homes at the site, and re-sell them to the needy.
Of course, the demolition of slums is also a hugely popular exercise, especially among the affluent and the middle-class. But ironically, it is the slum-dweller - from domestic helps and drivers, to cooks, baby-sitters, security-men, food vendors, carpenters, masons, plumbers, and electricians – who provide most of the essential services to the rich and the middle-class, who nevertheless crib about the hutment colonies.
Chidambaram may be the latest to boast of Mumbai’s possible emergence as an international financial hub, but successive chief ministers in the past have also had similar grand designs for the city. Unfortunately, though billions of rupees have been invested on upgrading the infrastructure, the quality of life in the city continues to deteriorate every year.
The Maharashtra government, which has run up a worrisome debt of over one trillion rupees, is now selling the Mumbai (and also the Shanghai, London and Tokyo) dream to the federal government, the World Bank, and other multilateral aid agencies, hoping to convince them to part with funds. Last month, the centre refused to forward a special loan application of the state government to the World Bank, citing the perilous state of its finances.
Delayed projects, cost over-runs, corruption while implementing the works, shoddy jobs, and disputes between contractors and the government have resulted in tremendous wastage and delays in executing projects. The state government now wants a hefty injection of funds to carry out half a dozen ambitious projects that would cost Rs400 billion.
Though Chidambaram referred to Mumbai several times in his budget speech, he has been careful not to promise anything substantial, knowing only too well that the state government would not hesitate in diverting the funds for other purposes.
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INDIA’S soaring foreign exchange reserves – last week it topped the $135 billion-mark – has been a cause of some worry, as the money has been virtually lying idle. Finance Minister Chidambaram, acting on a recommendation by Planning Commission Deputy Chairman, Montek Singh Ahluwalia, has now decided to use part of it (about $2 billion), to help fund a special purpose vehicle (SPV) for infrastructure development.
The country’s infrastructure sector – comprising roads and highways, airport and ports, and telecommunications and power projects – is hungry for funds. International pension funds, insurance companies and other institutions with deep pockets, many of who have entered India recently, are still chary about lending money for infrastructure projects.
The disastrous experience of foreign lenders in the Enron-promoted Dabhol Power Corporation project serves as a chilling reminder to these institutional investors about the political and financial risks involved in such mega projects. With reluctant long-term foreign investors, many of the infrastructure projects in India are languishing, forcing the government to try to kick-start the sector by setting up the SPV.
Of course, the Rs100 billion earmarked for the SPV is peanuts compared to the requirements of the infrastructure industry in India. According to the India Infrastructure Report – a comprehensive study of the infrastructure needs of the country – about $150 billion are needed every year as investments in the infrastructure sector.
The SPV will disburse funds to various projects, all of it to be monitored by an inter-institutional group of banks and financial institutions. But last year, a similar group was set up to pool resources – about Rs400 billion – for infrastructure funding. Much of the money expectedly has remained unutilised.
Chidambaram has also announced the setting up of a national urban renewal mission – with funds of about Rs55 billion at its disposal. The money will go to fund infrastructure projects in seven ‘mega’ cities, including Mumbai and Bangalore.
Unfortunately, infrastructure projects in India have a tendency of getting caught up in controversies. The most outstanding example is that of the international airport project in Bangalore. The IT sector, which is vibrant in Bangalore, had been demanding an international airport for years, enabling direct links to the US.
Politicians, however, have managed to make a mess of the entire project, forcing many of the foreign investors to wonder whether it was a wise decision to enter the sector. The Bangalore airport project has still not taken off, despite the federal and Karnataka governments promising an early end to the imbroglio.
Similarly, the federal government has been talking of privatizing both the Mumbai and Delhi airports – the busiest in the country – but there’s been virtually no progress so far. Ministers announce deadlines, which are blissfully ignored, and new ones are set. Not surprisingly, many foreign and even domestic investors look at these announcements relating to infrastructure projects with some degree of cynicism.
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ONE of the greatest ambitions of many young Indians in the 1960s and 1970s was to own a Bajaj scooter. There was a time when there was an unbelievable 20-year waiting period for a scooter manufactured by Bajaj Auto, and desperate people were willing to use every bit of influence they could muster to lay their hand on a two-wheeler.
There were special schemes with priority allotment of the vehicles to officers of the armed forces, and for relatives of Non-Resident Indians paying in hard currency. Thanks to the shortage, the Bajaj scooter also emerged as an important component of ‘dowry’, hankered after by prospective grooms.
Of course, today there are hardly any takers for scooters in India, Bajaj or otherwise. Motorcycles have replaced scooters as the fastest-moving two-wheelers, and Bajaj Auto itself has been relegated to second place. The company will notch up sales of 1.8 million bikes for the year ending March 31, 2005 (as against total sales of nearly five million motor-cycles in the country).
The dramatic changes in the two-wheeler market in India have also coincided with changes in the once formidable group, headquartered in Pune, about 150 kms south-east of Mumbai. Rahul Bajaj, the chairman, and a much-respected industrialist, faced a crisis last year, when his brother, Shishir Bajaj, raised a dispute over the ownership of the company.
Politicians, including Sharad Pawar, the Nationalist Congress Party boss – and the federal agriculture minister – intervened in the dispute, and brought about a rapprochement. The family feud has been sorted out, but according to Bajaj, the final settlement will take place only in June, instead of towards of this month as planned earlier.
Rahul Bajaj – who together with other close family members has an over 40 per cent stake in the company – plans to acquire his brother’s shares (almost six per cent) in Bajaj Auto. He will also divest his holdings in a family sugar firm, being run by Shishir.
And last week, Rahul announced his virtual retirement from the day to day running of the company, handing over the baton to his elder son, Rajiv, who will take over as managing director in April. Rahul, who steered the group for over three decades, will continue to be the chairman.
The cash-rich Bajaj Auto group is also acquiring majority control of Maharashtra Scooters, a joint venture with the state government. The two-wheeler market in India continues to be vibrant, as millions of cyclists switch over to motor-cycles and mopeds.
The low interest rate regime has resulted in cheap bank finance being available for funding motor-cycles and other two-wheelers, fuelling growth of the sector. Bajaj faces acute competition from the likes of Hero Honda, the TVS group from Tamil Nadu (which earlier had a tie-up with Suzuki of Japan), and a clutch of other producers.
With fuel costs soaring, many middle-class Indians prefer riding the efficient, four-stroke bikes that travel 60 to 80 kms on a single litre of petrol. Of course, a major threat for the industry is from the proposed rapid mass transit systems (including underground metros and overhead skybus services) that are being planned in several major cities in India, including Bangalore and Pune.
The two-wheeler sector has witnessed boom conditions because of the appalling lack of public transport in most Indian cities. But state governments, and even the centre, are keen on developing mass transit systems, especially following the success of the Delhi Metro.
