The Route of the Problem

The pace of growth for India is slowing. With a young workforce and high technological skills, the country shows promise. But it must “clean up the governmental morass and think holistically about what needs to be done to take advantage of its global connections and promote sustainable growth,” argues Nayan Chanda in his column for Businessworld. Strong growth and prosperity require reliable infrastructure, including energy distribution, roads, ports and other transportation routes. India has neglected investment in its infrastructure, as described by an interim report from the National Transport Development Policy Committee, which largely went ignored by the media. Growth projections vary immensely, and it’s a classic chicken-or-egg dilemma: Should growth come first or infrastructure? The final report will be released in September, and Chanda reports on signs that political leaders may be receptive to policy changes that will encourage modernization. – YaleGlobal

The Route of the Problem

If India needs to rev up and sustain growth, it must modernize the ailing freight traffic
Nayan Chanda
Monday, February 25, 2013

The falling growth rate amid mis-governance and corruption has taken the sheen off India as the poster boy of globalisation. Yet, there is a lot going for the country to pull out of the slump. India’s considerable resources, youthful manpower and abundance of managerial and technological skills can keep it in the league of reemerging nations. It, however, needs to clean up the governmental morass and think holistically about what needs to be done to take advantage of its global connections and promote sustainable growth.

One of the greatest obstacles to India’s growth has been its appalling infrastructure, especially failing energy supplies and transportation bottlenecks. A recent government report admitted that 260 projects including 123 in roads and railways have been running behind schedule and facing huge cost overruns. This failure means delays in export delivery, import of coal and lack of job creations at a time when 800,000 people are entering the job market every month.

For the first time since 1980s when the government tried to survey the national transportation system, it has ordered another study. The National Transport Development Policy Committee (NTDPC) led by economist Rakesh Mohan was en­­trusted by the Prime Minister to assess India’s transport ne­eds for the next two decades and to offer a comprehensive an­d sustainable policy recommendation. An interim report has been published, but, curiously, the media has barely no­ti­ced this document. For all the ink spent on be­moaning the country’s faltering growth, implementation of a comprehensive transport policy that could push up the GDP is ignored.

If the government is to achieve its goal of 7 per cent annual gro­wth rate over 20 years, the NTDPC report says, it implies an expansion in traffic by a factor of four and similar growth in both power generation and steel production. The Indian power sector has been hobbled by the government’s inability to supply coal, forcing the industry, more than half of which uses coal, to import it. Just as the sector faces difficulties in securing coal supplies, the newly installed steel mills may too encounter problems of transporting iron ore.

The report says “there is a pressing need for unprecede­nted capacity expansion of the Railways...” It calls for abandoning railway construction that is extraneous, undertaken for political rather than economic reasons, and focus on lines critical for industrial expansion. In the past 20 years, the report notes, China not only dramatically expanded its railway capacity, but also modernised its rail network. China has six railway design institutes, which compete for the design of each project. If India were to modernise its railways, it has to set up a new national railways research institute and introduce railway research centres in five additional IITs. 

India’s next Five-Year Plan should address the desirability of investing in 4-6 mega ports over the next 20 years. The report notes “eventually, all the terminals and cargo handling facilities at ports should be encouraged to operate at higher levels of efficiency... This can only be achieved through competition and not through a process of tariff setting.” Although India’s 12 major ports handle over 60 per cent of its cargo, their inadequacy forces international cargo to be trans-shipped at Colombo, or mega ports of in Dubai or Singapore. 

The report calls for revisiting the 12th Plan suggestions of building 30 airports by 2017 and another 150 over the next 10 years, based on economic rationale and financing possibilities. It noted that “the financial viability of most (domestic) airlines is currently precarious” and called for regulations for the orderly restructuring and, or, bankruptcy of airlines.

When the report is submitted to the government in September, will it be fated to gather dust? A positive sign, though, is the decision by the shipping ministry to deregulate the tariff charged by major port operators to help them undertake long overdue modernisation of ports. This is very much in line with the recommendation made in the interim report.


The author is director of publications at the Yale Center for the Study of Globalization and editor of YaleGlobal Online. The National Transport Development Policy Committee released its interim report in 2012.
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