MUMBAI: India needs to spend as much as $200 billion on boosting electricity supplies, running water, highways, ports and runways to bring its infrastructure to levels of other Asian nations.
It’s a pressing issue: top corporate executives and economists at this week’s Reuters India Summit cited infrastructure woes as a key threat to India’s phenomenal economic growth.
“If a consignment has to take seven days to cross 1,400 kilometres, it is a misuse of resources,” said the India head of Chinese appliance maker Haier Electronics Group Ltd., T. K. Banerjee, at the summit in Mumbai.
Hurdles to expanding infrastructure include political squabbles between state governments and national politicians as well as financing. When there is progress, it’s slow.
Under a national highway programme, just 13,000km have been completed while more than 60,000km are needed, said Y. M. Deosthalee, the chief financial officer of India’s largest engineering firm, Larsen & Toubro Ltd.
“It must be done at a much, much faster pace,” Deosthalee said. Infrastructure is taxed to the hilt, threatening to soften industrial output in Asia’s third-largest economy in the 2006/2007 fiscal year, said Indranil Pan, chief economist at Kotak Mahindra Bank in Mumbai.
Strong manufacturing, as well as services, are expected to lift gross domestic product (GDP) growth to 8.1 per cent this year.
Indian roads carry 85 per cent of passenger and 75 per cent of freight traffic. Highways make up just two per cent of the total road network yet carry 40 per cent of this traffic.
“If the infrastructure is not developed, then you will have bottlenecks,” said Bharat Doshi, executive director at tractor and utility vehicle maker Mahindra & Mahindra Ltd.
More than 14,280km (8,900 miles) of national highways are being widened to between four and six lanes at an estimated cost of 650 billion rupees ($15 billion).
Infrastructure problems run deeper than roads, they touch shipping, water and power — India has a 10 per cent electricity shortfall during peak hours.
“The quality of power is horrendous. There are shortages all over the country,” said Haier’s Banerjee, adding that washing machine sales are stuck below the two million mark because most cities do not have running water 24 hours a day.
India’s power deficit could cap growth in a couple of years, warned Ajit Ranade, chief economist at the Aditya Birla Group conglomerate.
“Electricity is directly connected with GDP. We shouldn’t land up in a situation where GDP can’t grow any more because there’s no electricity,” he said.
Improving the country’s infrastructure supports many other industries, said L&T’S Deosthalee.
“It boosts the capital goods sector because a lot of equipment manufacturers would benefit from it and it brings in FDI (foreign direct investment).”
The government is keen to boost cash coming into the country and recently partially liberalized FDI limits in sectors such as airports, mining and retailing.
Ports and airports need immediate attention.
At India’s ports — where container traffic grew 15 per cent a year in the five years to 2004 — insufficient capacity, inefficient operations and a lack of deep drafts capped growth.
Turnaround times at Indian ports improved to between three and four days in 2005, from about eight days in 1996, but still lag Asian rivals like Hong Kong where turnaround is one to two days.
“Most Indian ports have drafts of less than 10 metres and you cannot really take advantage of international shipping unless you have ports with drafts, cranes and storage,” said Oil and Natural Gas Corp. Chairman Subir Raha.
Passenger traffic at 125 state-run airports topped 50 million in the year to March 2005 and is estimated to rise 12 per cent each year between now and 2009. Already, passengers queue in long lines inside as carriers battle it out for terminal space outside. Regulatory delays bogged down construction of Bangalore’s new international airport, due to be finished in 2008. The antiquated airport, pot-holed roads, flooding and power outages are constraining the outsourcing boom in Bangalore, a city that accounts for 35 per cent of India’s $17.2 billion software and business services export industry.—Reuters
