Professional Documents
Culture Documents
Governance in India
Governance in India
TABLE OF CONTENTS
Contents
ABSTRACT ________________________________________________________________________________________________ 1
Introduction ______________________________________________________________________________________________ 2
History of infrastructure in India. _______________________________________________________________________ 3
Current state of Indias infrastructure __________________________________________________________________ 4
Importance of Infrastructure in India___________________________________________________________________ 6
Potentials of the Indias infrastructure _________________________________________________________________ 7
Employment generation in Infrastructure Sector. _____________________________________________________ 8
Sub-sectors________________________________________________________________________________________________ 9
Foreign trade policy on infrastructure sector ________________________________________________________ 14
Related articles and extra read ________________________________________________________________________ 15
Conclusion ______________________________________________________________________________________________ 16
References ______________________________________________________________________________________________ 17
ABSTRACT
The Indian infrastructure sector continues its sluggish journey in 2012, marked by poor
macroeconomic forces, policy gridlock and political instability. Delays in land
acquisition and environmental clearances continue to be key areas of concern, while
the poor enforcement of contracts, ineffective monitoring and high input costs are also
factors that are hindering growth. Nonetheless, some areas have witnessed progress.
The telecom sector saw the emergence of the National Telecom Policy, a cohesive
document covering a broad range of communication services. In both civil aviation and
power sectors, the Government of India has approved foreign investment of 49 per
cent, bringing relief to the heavily leveraged public and private companies. However,
several events in the infrastructure sector have been disappointing this year the
telecom sector dealt with the fallout of the 2G scam, the power sector witnessed the
coal scam and the grid collapse, the roads and urban sectors saw the poor private
participation, and the civil aviation sector witnessed the poor financial health of the
airport and airline operators. The end of the 11th Five-Year Plan saw India missing
targets in infrastructure development in sectors such as railways, ports, electricity, and
airports, while investing beyond the budgeted investment in others the roads and
telecom sectors. Overall, Rs9.45 trillion as invested in Indian infrastructure between
fiscal years 200708 and 201112, 95 per cent of the projected Rs 20.56 trillion.
The 12th Five-Year Plan projects the total investment in infrastructure during the
period to be Rs 51.46 trillion, with 47 per cent contributed by private participation and
53 per cent by the central and state governments.
This report addresses the achievements, policy developments and problems faced by
various sectors. Physical and financial progress are tracked in these crucial sectors,
along with the introduction of new policies and participation of the private sector.
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Introduction
India's emerging economic power, like that of neighboring China, has been spurred by
its momentous growth rates in the past few decades. But years of underinvestment in
infrastructure have left the country with poorly functioning transit systems and power
grids that have further endangered its slowing economy. Growth slipped from 10.5
percent in 2010 to 4.8 percent in 2013, according to the World Bank. Burgeoning trade
is putting pressure on India's inefficient ports, and rapid urbanization is straining the
country's unreliable electricity and water networks. Bureaucratic red tape and political
inertia have thwarted the success of foreign investment partnerships and bruised India's
international standing, discouraging further outside investment. Such large-scale
failures have raised sharp debate about how the country's infrastructure weaknesses
will hamper its economic future as it struggles to recover from a slowdown.
Post-independence, the government led a state-centric approach to infrastructure
development by building, owning, and managing projects. The system created a host of
inefficiencies; after years of unmet demand and growing financial constraints, the
government opened the sector to private investment as part of its economic liberalization
in the early 1990s. The endemic dysfunction has bruised India's international standing
and further discouraged direly needed outside investment. India ranked 85 out of 148
for its infrastructure in the World Economic Forum's most recent Global Competitiveness
Report. Delhi and Mumbai, its two largest cities, ranked far below other regional capitals
like Beijing and Bangkok for infrastructure in a UN report.
In this report the main focus on infrastructure sub sectors are:
1) Airports 2) Railways 3) Roads 4) Telecom 5) Ports 6) Power
The Indian economy is still expanding significantly, and substantial investment in
infrastructure continues to be required in order to sustain Indias economic progress.
The countrys capacity to absorb and benefit from new technology and industries
depends on the availability, quality and efficiency of more basic forms of infrastructure
including energy, water and land transportation. In some areas, roads, rail lines, ports
and airports are already operating at capacity, so expansion is a necessary prerequisite
to further economic growth.
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These poor conditions of the roads drastically affect the business transactions across
the country and need an overall repair. The international trade in India is adversely
affected by inefficient ports which are congested and expensive. According to Morgan
Stanley, freight as a percentage of total import value is about 11 percent in India,
compared with a 6 percent global average and 5 percent for developed countries. There
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is also a higher lead-time for trade: 6 to 12 weeks for India's trade with the United States,
compared with China's 2 to 3 weeks.
In terms of non-debt and debt sources, almost 50 percent contribution each from debt
and non-debt sources would be required. However, availability of debt is placed at INR
13,337 billion as against a requirement of INR 32,363 billion leaving a funding gap of
INR 19,025 billion to be addressed.
IN TABLE - DEBT SOURCE VS. REQUIREMENT
Given the above gap in debt funding, the ability to meet infrastructure investment target
of USD 1 trillion (INR 65,000 billion) will critically depend on two factors. First, the
Government's ability to successfully increase reliance on the bond market as an
alternative source of financing to bank loans and, second, their ability to implement fiscal
consolidation as a means of freeing up bank lending and reducing upward pressure on
interest rates. Given the above gap in debt funding, the ability to meet infrastructure
investment target of USD 1 trillion (INR 65,000 billion) will critically depend on two
factors. First, the Government's ability to successfully increase reliance on the bond
market as an alternative source of financing to bank loans and, second, their ability to
implement fiscal consolidation as a means of freeing up bank lending and reducing
upward pressure on interest rates.
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Sub-sectors
POWER
The chronic electricity shortage is increasingly viewed by the government and
international business community as one of the gravest threats to India's growth. While
GDP had grown at around 4.7 percent until 2012, electricity generation only increased
at 7 percent a year, according to the World Bank. Thermal powerwhich includes gas,
liquid fuel, and coalaccounts for roughly two-thirds of power generation, with most of
it coming from coal. Other sources include hydro, wind, solar, and nuclear.
Despite the jarring disappointments brought to the power sector this year in the form of
the coal scam, the only notable step taken by the government is towards the financial
restructuring of power distribution companies. By September 2012, total generation
capacity stood at about 208,000 MW, having increased by 15,000 MW since the
beginning of the calendar year (Central Electricity Authority 2012). A majority of the
capacity enhancement occurred in coal-based thermal plants, followed by marginal
increases in gas-based thermal and renewable energy generation.
IN TABLE INSTALLED CAPACITY OF POWER IN INDIA
By September 2013, 600,240 villages had been provided electricity, i.e., 90 per cent of
all Indian villages. Under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) or
the Scheme for Rural Electricity Infrastructure and Household Electrification, 105,000
(of the targeted 110,000) villages had been provided with electricity, while free electricity
connections had been given to 19.5 million Below Poverty Line (BPL) households (by
April 2012).
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Prominent companies
Public sector
o
o
o
o
o
o
Private sector
o
o
o
o
Adani Power
Tata Power Company Ltd
Suzlon
Reliance Power Limited
ROADS
In September 2013, the total length of the road network was 33 lakhs km. The National
Highway Development Program (NHDP) being implemented by the National Highways
Authority of India (NHAI) had achieved 17,372 km of four-lane national highways (by
October 2012) out of the total 48,254 km covered under the NHDP (NHAI 2012). Under
the Pradhan Mantri Gram Sadak Yojana (PMGSY) about 55 per cent of all rural
settlements had been connected by 214,758 km of new roads and 142,528 km of
improved roads by June 2012. During the fiscal year 201112, NHAI constructed roads
at the rate of 6.16 km per day, while the State Public Work Departments and Border
Roads Organization completed 4.23 km per day. The average road length constructed,
however, falls well short of the targeted 20 km per day. Given that the road freight
volumes have grown by 9.08 per cent and vehicles have grown by 10.76 per cent, it is
important to achieve the 20 km per day target.
Prominent companies
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RAILWAYS
Indian Railways is the fourth largest railway network in the world in terms of route
kilometers. As on 31 march 2011, it has a total route length of 64,460 km of which 21,034
km is electrified. The total track length is 1,13,994 km of which 1,02,680 km is broad
gauge, 8,561 km is meter gauge and 2,753 km is narrow gauge. Considering the
requirements of the economy and size of the country, the expansion of the railway
network has been inadequate. Indian Railways have added 11,864 km of new lines since
independence.
Railways have opened up container movement to competition and 16 entities have been
granted concessions for operating container trains. However, in other areas progress in
pushing PPP investment has been slow. The Ministry has identified 50 stations for
development as world class stations through the PPP route but no concessions have
been awarded. It has also invited expressions of interest for the development of logistic
parks through PPP. A 60 km elevated fully air-conditioned rail system in Mumbai is also
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converted to long-term debt with tenure of 1015 years, while `74 billion will berepaid
through non-convertible debentures with government guarantees. Recent
developments have indicated that Air India will be selling or leasing some of its
domestic and international properties for additional fund raising.
Prominent companies
Air India, Indigo, JETAIR, DECCAN AIR. Etc
TELECOM
By October 2012, the wireless subscriber base in India had increased to 938 million,
consisting of 596 million urban and 342 million rural subscribers. The number of
wireline subscribers continued to decrease, with only 3.3 per cent of all telecom
subscriptions belonging to wireline services.
This decline can be attributed to the relative aff ordability of wireless connections and
the convenience with which they can be obtained. Overall telephone density or
teledensity had increased from 75 per cent in October 2011 to 77 per cent in October
2012, while urban and rural teledensity had reached 161 per cent and 40 per cent,
respectively.
Prominent companies
Page 13
Reliance Infocomm
Tata Indicom
MTS
MTNL
Page 14
Power and electricity specialist Sunila Kale writes about the politics behind
India's power failure in this Foreign Affairs article.
The New Yorker delves into the narrative of India's growth story in this 2012
article.
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Conclusion
Outlook for investment in infrastructure in
India is very positive Infrastructure
development boosts the economy on a
macro level. Industries like steel, cement,
bitumen, commercial vehicles (trucks)
also grow due to investment in
infrastructure apart from the creation of
employment for many. Sectors like roads,
ports and rail infrastructure are the ones
which have huge potential and require
massive capital over the next decade or
more.
Despite the minor pitfalls, investment in
infrastructure is bound to give expected
returns. The banking sector in India is
positive in its approach for lending to the
infrastructure
sector
backed
by
regulators. Other sector regulators are
tweaking their policies to fit to the needs
of entrepreneurs and to provide a level
playing field which is an encouraging sign
for future investments.
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References
1. Underpowering The Economist, 2005.
2. Governance in India: Infrastructure- http://www.cfr.org/india/governance-indiainfrastructure/p32638
3. Five Year Plan
4. Investment in Infrastructure http://infrafin.in/pdf/IBEF.pdf
5. Working Sub-Group on Infrastructure
6. Infrastructure Funding Requirements and its Sources over the implementation
period of the Twelfth Five Year Plan (2012- 2017)
http://planningcommission.gov.in/aboutus/committee/wg_sub_infrastructure.pdf
7. Report on Indian Urban Infrastructure and Services
http://niua.org/projects/hpec/finalreport-hpec.pdf
8. Mahadevia, D. (2010). Urban Reforms in Three Cities: Bangalore, Ahmedabad
and Patna. In Chand.V (eds.), Public Service Delivery in India: Understanding
the Reform Process. Oxford University Press.
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