Andy Mukherjee is a Singapore based Bloomberg Columnist that I read in the International Herald Tribune. He is fast becoming one of my favorite journalists. His commentaries on Indian economy are crisp, incisive and often iconoclastic. Today he has an optimistic piece on the infrastructure build-out in India titled ‘The rich plug the gaps in India’.
Frankly I could do with a dose of optimism. We have been back in Bangalore for the last two and half years and I haven’t seen much happen on the infrastructure side. Things have only gotten worse. So much so that, I have steadily become more bearish about the prospects of the city on account of the crumbling infrastructure.
It’s just not Bangalore that’s in trouble. Look at the facts about the national road infrastructure. I read recently that the 5,846 km Golden Quadrilateral (GQ) highway project – to do four-laning of the highways connecting the four big metros – is already 2 years late and still has 7 percent of the construction left. The other big highway project, the North-South and east-West Corridors (NS-EW) involving a length of 7,582 km is only 15% complete even though the completion deadline is only two years away. GQ project averaged only 2.6 km a day and at this rate the NS EW project will take six and half years more to complete.
Yet Andy is optimistic. His optimism comes from the private sector stepping in. He acknowledges that “Quality public sector projects will remain limited to rare successes like Delhi Metro Rail transit system because of sheer paucity of management skills within the government”. But he feels that “Give it a few years. The private sector in India will build and operate substantial amounts of physical infrastructure.” Finally he concludes that “Adequate power supply and tolerable transportation networks are within reach of India, and sooner than people realize”.
I admit that if the banking sector and telecom sector reform is a harbinger of what might happen on the road, power and airport infrastructure, then Andy might indeed be right. Things in banking and telecom have improved dramatically after the private sector moved in. The real question for me is this: have things gotten bad enough for the public sector to be forced to relinquish control? Andy seems to believe that this tipping point has happened. I sure hope he is right.
Nonetheless some day we still have to confront our public sector and make it accountable. Although roads, airports, ports and telecom networks can be built by the private sector, there is some primary infrastructure – primary healthcare and primary education – that has still to be provided by the government. Today this primary infrastructure is also in doldrums. If this is not addressed soon then the 8% growth rate will quickly exacerbate the disparity that already exists. And as this disparity grows, it will begin to tear the country apart. Faster growth means that there is less time left to address this issue.
IT industry in India is lending its voice for change in the functioning of the public sector. Industry leaders like Narayana Murthy (of Infosys) and Azim Premji (of Wipro) have been vociferously championing the need for improvement of the primary infrastructure of healthcare and education. NASSCOM, the industry body, is also doing its bit. So far all these efforts haven’t made much of a difference. I wonder when that will begin to change.
I’ll take Sharad’s advice to step outside my comfort zone and try my hand at a topic I’m not familiar with. My only qualifications are the fact that I experience Bangalore’s woeful infrastructure every day and feel I should do something about it but don’t know where to start.
While Andy’s arguments are good, I feel the challenges are severe. One hypothesis I have is, wherever the central government has jurisdiction you are likely to see improvements at a faster rate. The quagmire is at the state government level. Compare the airline choices today with Jet, Sahara, Kingfisher and so on compared to 20 years ago when all you could do was Indian Airlines. A similar story with telecom, automobiles (with the government stake in Maruti), banking and so on. The sectors where the state plays a key role e.g. electricity, roads, transportation, education have not progressed well. This makes me ponder as to why? Is the central government more forward thinking? Does representing India give you as a government member a better chance to drive change? Are the bureaucrats in the centre more capable? Or is it simply about politics — more factions and short sightedness at the regional party levels?
While I’m no constitutional expert, I feel a real way for us to get more optimistic about this topic is if the centre exerts greater authority over jurisdiction (low probability) or we see greater delegation of authority from state governments to local, city, municipal and panchayat governments. Unless we get this done, I feel it is highly unlikely that we will see a real improvement in civic infrastructure.
Reminds me of a fact that I was thinking recently. Will be interesting to know what others think about this.
We are looking at spiralling real estate prices in most major cities in India. In a lot of occassions prices of apartments are beginning to touch sky high figues of Rupees one crore and above. Equivalent of 1 cr. is approximately USD 220k.
Now if I were to compare housing in US, some of the smaller states in US could provide excellent housing for that kind of money! In fact, in terms of infrastructure, US is ages ahead of India. However small the state in US, basic infrastructure like roads, electricity, water etc. are all available. Much of which is not available in India EVEN in the large metros - and yet we are seeing prices that are reaching proportions that are touching those of US !
Would it then not be reasonable that at some point someone will take notice. They will wake up to this fact and say - “Hey, I could afford better housing in US than India. Why not relocate to US for a better living!”. Would that not lead to a “reverse tipping point” where there is disillusionment about the expectations from India that were belied convincingly?
Yes we as a country are progressing fast. Yes our GDP growth is 8% . Yes we are a nation that is producing talent all across the spectrum. But, where is the political will to build on the expectations that we have raised? I agree that the Center has done comparatively well, especially in the last 7 years. However, can we take it forward all the way or will we reach a “reverse tipping point”?
Why Indian government is a laggard compared to private sector?
1. India has some of the best entrepreneurs of the world. I doubt any government employee would have the will & talent & commitment to beat the likes of the Tatas, Ambanis, Birlas, Ruias, Mittals and the new heores like Narayana Murthy, Premji…
2. Indian government burdens itself with loads of subsidies, that is better to be off-loaded with the entry private sector, as it would be politically impossible to do the things from public sector. Take the case of petroleum. I dont understand why should diesel & kerosene be subsidized to that extent. But, it is a political sacred cow. Solution: Allow players like Reliance who export products and are not burdened by the subsidy committments.
3. Government has unproductive practices for recruiting candidates. It is important to have just Caste, Connections & lotta Cash to get a government job & capabilities are unimportant.
While my heart goes out to some of the well run entities like SBI & ONGC, it is in their interest that governemnt should go on fully privatizing them as they can fully levarage their great potential. I eagerly expect some power reforms, as it is the most critical of development. The govt shud start privatizing distribution at the cities and parallely allowing private power entities to choose their customers.
At some point only the subsidy users will be left with the government systems, and they have to choose whether they want a free & unreliable government system or the paid & reliable private system & bingo, we have got the end of the Subsidy Raj.
Good points Balaji and a nice blog!
The current economic progress is strongly correlected to the withdrawl of the government from key sectors (telecom is a good example). More of that is needed as you point out. There is no doubt that we need a smaller government. This smaller government has to focus on primary education and healthcare. But just reducing the size won’t make an athetoid government into a functioning one. We need to find ways to bring accountability into the system. Ultimately an atrophied government is not an answer to all our problems.
P.S. I just saw this relevant news item, Narayana Murthy blasts bureaucracy.
hello,
i am suresh doing my mba.i was so pleased to read the site and i really thank all the experts who have shared their views for the better understanding of lay man.i once again thank u all for this good efforts
…………………….suresh