THE more you invest in a nation’s infrastructure, the faster will be the economic growth.

This truism has been reiterated ad nauseam by Indian Prime Minister Manmohan Singh, heading a virtually lame-duck government, at seminars, conferences, cabinet meetings and other forums. But beyond restating the obvious, his government has barely pushed ahead with concrete initiatives in the last three years.

Last week, Singh summoned a meeting of ministers and bureaucrats representing key infrastructure ministries — including power, coal, railways, surface transport, civil aviation and shipping — to emphasise the need to step up investments in the sector.

This followed the release of data a few days earlier, indicating the miserable state of the Indian economy; GDP for fiscal 2011-12 grew at 6.5 per cent, the lowest in nearly a decade, and down from the previous year’s 8.5 per cent. Worse, for Q4 of the fiscal (January-March, 2012), it dipped to a low of 5.3 per cent.

Fiscal deficit is at a high 5.8 per cent of GDP, way above the budget estimates of 4.6 per cent and the government’s ultimate goal of capping it at two per cent. Current account deficit (CAD) is also at an unpardonably high level of four per cent of GDP, way above the 1.1 per cent to 3.3 per cent range that it ruled since 2004 when the UPA came to power.

Fortunately for India, the disappointing figures woke up the leadership of the Congress party, which heads the United Progressive Alliance (UPA) government. Inundated with ominous news including declining economic growth rates, stubbornly high inflation, widening fiscal and current account deficits, a plummeting currency that has been one of the worst-performing in Asia, burgeoning demands for funds from allies in power in various states, the ceaseless flow of corruption charges against prominent politicians and electoral defeat in several key states, the Congress now appears to realise its folly of underplaying the ‘India growth story’ of the previous decade.

The problems confronting the Indian economy, as Singh learnt on the very day he summoned key ministers for the crucial cabinet meeting, cannot be wished away by restating economic truisms. The fact is that the UPA government is propped up by one of the most unreliable allies in Indian polity, the Mamata Banerjee-led Trinamool Congress (TMC), which thrives on political blackmail and brinkmanship.

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THE crucial cabinet meeting was virtually boycotted by the TMC representative, Mukul Roy, the railway minister and a loyal Banerjee aide. The TMC has been demanding an economic revival package for West Bengal, adding up to a whopping Rs250 billion (about $4.53 billion), much of it to clear outstanding dues to both the central government and private lenders.

Worried that other state governments may also come out with similar demands, the UPA government has been resisting Banerjee’s claim for funds, but at a high cost to the Indian economy. The West Bengal chief minister has stalled virtually all initiatives for economic reforms of the UPA government since it was voted back to power in 2009.

Last week, Roy refused to attend Singh’s meeting even though he was heading the important railway ministry — which also has a major role to play in beefing up infrastructure — and later also forced the government to stall key changes to the much-awaited Pension Fund Regulatory and Development Authority bill.

The TMC has likewise been blocking attempts to introduce changes in the insurance laws, opening up multi-brand retailing to foreign direct investment (FDI) and allowing foreign airlines to invest in India’s civil aviation sector, whose fortunes have plunged in recent months.

Banerjee has also prevented the government from slashing wasteful subsidies on fuel including petrol, diesel, kerosene and liquefied petroleum gas, and has forced it to continue funding the shocking and recklessly soaring demand for petroleum products from affluent Indians driving sports utility vehicles and luxury cars.

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BUT the TMC is not the only speed-breaker that forces the UPA government to drive in low gear. Most of the infrastructure ministries are headed by unimaginative politicians or warring members of the Congress, who have successfully stalled any efforts to boost investments.

Last week, Singh set yet another obviously impractical target of investing at least Rs2 trillion ($36.27 billion) for core sector projects in the current fiscal, to ensure that the economy is back on the nine per cent growth path.

“In these difficult times, we must do everything possible to revive investment and business sentiment, both public and private,” said the prime minister. “We must work to create an atmosphere which is conducive to investment and to removing any bottlenecks to growth.” He also set ambitious targets for investments in ports and civil aviation, power generation, coal production and railway freight carriage, besides new projects for the railways and roads and highways sectors.

Singh and his close lieutenant, Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, have set a target of investing $1 trillion in infrastructure over the next five years. The government obviously does not have the necessary funds and is keen to involve private players.

International investors are eager to invest, but the global crisis — especially in Europe — and India’s failure to reform sectors such as pensions and insurance has seen very little investments happening. Pension funds and insurance companies are among those that have deep pockets and are willing to wait for several years for returns; they usually tend to invest in infrastructure projects with long gestation periods.

But with the government’s inability to raise the FDI limit in the insurance sector and the failure to introduce the pension funds regulatory bill, none of the major global players are expected to bring in the necessary funds.

Many of the important infrastructure ministries are also headed by unimpressive politicians whose track record has been pathetic. They include power minister Sushilkumar Shinde, the road transport and highway minister C.P. Joshi, coal minister Sriprakash Jaiswal and shipping minister G.K. Vasan, and of course the railway minister, Roy.

Though Singh is known to be eager to reshuffle his cabinet and bring in more dynamic — and younger — politicians into key ministries, his hands are tied up with the present political set-up (where Sonia Gandhi, the Congress president, has to clear such decisions) and the presence of unreliable allies, who demand that certain ministries be reserved for them.

The various infrastructure ministries also have to battle it out with the ministry of environment and forests, which has been stalling several mega projects across the country for years. This has also discouraged global investors who are fearful that intra-ministerial rivalry could derail their investment plans.

The fate of the single biggest foreign investment into the country, a $12 billion steel project by South Korean major Posco, is a glaring example of how foreign investors are treated by politicians. Posco signed an agreement with the Orissa government in 2005, and over the next few years was busy defending its project from rapacious politicians, so-called environmental and tribal rights activists and other interests.

Posco is now planning to take a final decision on the ill-fated project and could in all probability end up sharply reducing the capacities and investments, or ultimately scrapping it.