A government that was elected to power on the promise of ushering in an economic revival nationally, will have good reason to cheer over the latest data showing an increase in investments in the road and power sectors. With roads and electricity acknowledged as significant multipliers of economic activity, any substantive improvement in these infrastructure sectors can presage a major boost to the real, productive economy. McKinsey & Co. estimates an increase in infrastructure investment equivalent to 1 per cent of GDP would generate an additional 3.4 million jobs, directly and indirectly. Conversely, the low global ranking of India’s infrastructure — the World Economic Forum’s Global Competitiveness Index placed it in the bottom half among 144 countries — is one of the commonly cited impediments to attracting foreign direct investment. A 2014 study by Dr. Geethanjali Nataraj of the Observer Research Foundation estimated that lack of world-class infrastructure shaves off 1 to 2 per cent from GDP growth every year. It is in this backdrop that the 46 per cent surge in project announcements, representing an amount of Rs.1.2 lakh crore, in the first quarter of the fiscal offers much hope. More important, the 31 per cent jump in the completion rate of projects during the period signals a distinct improvement in the investment climate, especially in terms of efforts to reduce red tape and revive stalled projects. Success in bringing long-mired projects to fruition also bodes well for the banking and finance industry, which has struggled to reduce the levels of non-performing assets. And with the NDA government’s focus being on encouraging more private-public partnerships, this is a promising augury for private investors in the road and power sectors. The Vajpayee government’s Golden Quadrilateral project, completed during the UPA’s term, has brought socio-economic change and development to the hinterland along the more than 5,800 route km of the highway network. That gives a glimpse of the potential that can be unlocked through better urban-rural connectivity.
Still, the data have made only a broad classification of the road transport sector. Not offering a breakdown of the real level of investment in road construction and maintenance could be partly misleading if the aggregate investment in the automobile sector is being included in the overall numbers. Also, the national road network has been blighted by an abysmal safety record. The government’s announcement of $93 billion worth of projects in the highways sector has to be seized as a chance to build world-class expressways and ensure that systems are put in place to lift safety levels for the road transportation network to global standards.
Keywords: economy, infrastructure, GDP growth
