ROAD TO SUCCESS
Connectivity—through roads, rail or waterways— is vital for stable GDP growth. At the micro level, it offers better access to education and income opportunities. Within this framework, the present Government has been doing a lot. In order to understand th
The unfolding opportunity SUDHIR HOSHING, Joint MD, IRB
Infrastructure: We have 35 years of experience in the sector. We started with a few thousand rupees, and we vividly remember how a contract of Rs 4 crore was a major achievement. Today each project talks of 1,000 km and above, instead of 50-100 km sizes. For the sector, the real game-changer was the implementation of the Golden Quadrilateral plan by the Vajpayee government in 1999-2004. In terms of size, I can say that the previous plan of such a big scale was the Grand Trunk Road renovation and extension, by Sher Shah Suri (in the 16th century). RAJAT GUPTA, Director, McKinsey and
Company: We are building 50,000 km of rural roads in a year, spending around Rs 30,000-50,000 crore. This is a huge connector and poverty alleviator, and this programme is going really well. Money is flowing to the executing agencies, the progress is being monitored, when you travel to the interiors you can see it panning out. INDRANIL PAN, Economist, IDFC Bank:
We always think that India is running a sprint, whereas actually it is running a marathon. Today infrastructure integration is visible and wealth creation scope is enhanced on a large scale. It is likewise an employment multiplier at all levels— direct, indirect and induced employments.
I looked at some data points from a working paper of the International Labour Organization, reflecting the employment multiplier and types of employments, which were quite startling. Type one is the direct employment multiplier, which can be talked of in GDP terms. Type two is the second round in direct employment multiplier, which emerges out of the demand that the construction industry on roads and other projects actually can generate. Then there is another type—an induced multiplier, which is the inference that whoever is working on that project would not have had that work opportunity earlier, and since he has gainful employment now, the consumption bias of the economic can improve to that extent.
The study looked at two states, Gujarat and West Bengal, and what emerged was that Gujarat saw type one and type two multipliers at 2.6 and 5 respectively while for West Bengal it was as high as 3 and 8. While not getting into the discussion of why there is a difference, it is clear that GDP multipliers are quite high and it is also statistically proven that road-driven GDP growth is higher in the case of road-building in rural areas. India’s rural areas are ripe for growth—there is much arable land, there is good quantum of produce. Roads can enable the marketable surplus to reach areas of demand and get proper value realisation. It will have a strong positive impact on the profitability of farming in general.
Another impact of road-building is improved access of rural areas to education and healthcare facilities. These two are vital constituents of life and from an economic sense their deprivation is a drag on individual productivity and national GDP. Once there is an improvement in this area, it will have a huge long-term positive impact on the regional GDP, if not the national GDP. Our agricultural GDP growth fluctuates— it may be 8 per cent or go negative. With better linkages, we could enable a more stable agri-sector growth, especially with the research in the Krishi Kendras coming up as well, and ease out stress on farmers.
CP JOSHI, Secretary, Roads, PWD: Today Maharashtra has around 95,000 km length of roadways. The enhancement plan includes upgradation of existing national highway network, as well as coordinated selection of tourism and industrial locations and enhancement of road network for those places. The programme includes upgradation of 10,000 km of state highways, and construction of 14,000 km of new roads.
The investment requirement through the HAM (Hybrid Annuity Model) model would be met. With almost 60 per cent (across two years) coming from the government where the money is very much in place. The remainder 40 per cent of investment is through deferred annuity payments over ten years. We aim to provide are toll-free roads of international standards. The HAM model was the path breaking initiative from the Maharashtra government. Change in approach required
RAJAT GUPTA: What is amply clear from the Minister’s speech is that there is a deluge of infrastructure projects coming up, and that this pipeline is moving at different levels of progress. We need to start thinking about infrastructure in a more integrated way and focus on optimisation. There has been a notification from the Ministry of Commerce, for creation of a department which is overall incharge of logistics for a national logistics strategy and other such dimensions.
In India, 60 per cent of goods movement take place via road, whereas this is below 50 per cent in most other nations. Regarding the coastal shipping, China moves 24 per cent of goods traffic this way. Today, India’s railways have 18 per cent share in long-distance container movement, which should move to 25 per cent. Obviously, we have a long way to go and solutions will be intermodal in nature. Road transport share must be brought down to 50 per cent in a goods traffic growth scenario.