India cannot afford to delay land reforms

lead to a similar rise commercial airports.

Despite the impressive show Modi and his party put up in the lower-house elections, they don’t have a majority in the upper house of India’s parliament. Numbers move more slowly in the Rajya Sabha, with a third of members retiring every two years.

That means that passing legislation such as a land-acquisition bill, which is crucial to speed up infrastructure development, will remain a tough ask until at least 2020.

Access to land, which is expensive and difficult to acquire, remains the single biggest issue for why road and other construction in large projects stall in India, according to capital expenditure surveys and Goldman Sachs Group Inc. The upper house previously rejected a land acquisition bill. Modi’s decisiveness may have won over voters, but he doesn’t have a track record of boosting confidence among Indian companies. They aren’t going to start spending until they see signs that the government is making progress on cutting through the perennial regulatory hurdles surrounding land.

During Modi’s first term, private companies slowed their spending on plants and machinery to a 9.2 per cent rate of annual expansion, and employment growth fell to 1.3 per cent. A decade ago, spending was growing at 19.5 per cent and employment at 10.5 per cent, according to data from the Centre for Monitoring Indian Economy, or CMIE.

New investment proposals in the last fiscal year were the lowest in 14 years, after rising when Modi first came to power.

Shares of construction and transport companies such as Larsen & Toubro Ltd, Dilip Buildcon Ltd and Adani Ports & Special Economic Zone Ltd have risen sharply this year on hopes of a “New India”. The reality for infrastructure companies is that Old India will be around for a while longer.