The government's well publicised announcement to kick-start key infrastructure projects as a means of reviving the economy might have cheered the stock markets but instant market reactions are not the best guide to economic policymaking. The government needs to convince an increasingly cynical audience that its sound theoretical assumptions — of massive investments in core infrastructure areas acting as a catalyst for spurring economic growth — can in fact be implemented at this juncture. In addition to boosting investment rates across several sectors in the short-run, infrastructure development will remove supply-side constraints to economic growth in the long run. It is in the practical aspects of their implementation — the fact especially that many of the projects have not delivered on their initial promises or become controversial in some way — that the infrastructure sector has earned a bad name. The Centre has proposed an investment of at least Rs.2 lakh crore during the current fiscal year. Earlier this year, in his budget speech, the Finance Minister estimated that in the Twelfth Plan period, infrastructure investment will go up to Rs.50 lakh crore, to be funded equally by the public and private sectors.
Those are gargantuan amounts and on the face of it, mobilising them appears to be the biggest hurdle. However, several expert committees have vouched for the availability of money, given the right policy. One strategy could be to invite the private sector in order to lessen the dependence on public funding. However, attempts to create a conducive environment for private sector participation with a credible and transparent regulatory mechanism have not been wholly successful. Besides, private capital has not been attracted to areas such as irrigation, water supply and sanitation. Even as the government continues to swear by it, the time has come to question the very large reliance on the public-private partnerships (PPP) route for promoting and running infrastructure projects. Some of the showpieces set up through the PPP route have become controversial. Over the recent past the government has taken a number of steps to facilitate infrastructure funding. Some of these, such as the one allowing easy access to external commercial borrowings, smack of short-termism and should be avoided, while those that seek to attract traditional infrastructure investors such as pension funds and insurance companies are clearly on. In announcing a stimulus package for the economy, the government's aim might be to demonstrate its assertiveness in decision making; but as long as it walks the talk, it is not infrastructure alone that will benefit.