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.
Keywords: infrastructure projects, Indian economy, economic policymaking, ublic-private partnerships
Creating good infrastructure can be an alternative to many unsolved disputes which is hampering the growth story of india.For example,if we are able to identify barren lands or lands which are less suitable for cultivation,and if we connect those areas with cities and towns,then industries can be set up in such areas.In this way many land disputes can easily be avoided without compromising the development.
I think the UPA members are running short of money as 2G, Adarsh etc are already old, hence UPA has come with new 2 lakh crore project ..just to enhance their income. Corruption rules the country.
PM's announcement should not be like the Memorandum of Understanding signed these days by various State governments to attract investments. Infrastructure projects do have a good role to play in our stimulus programmes. But one hopes that our PM is aware of the number of bureaucratic hurdles in getting sanctions for and then setting up of infrastructure projects. There are rules and regulation well intended for proper implementation of such projects; in practice they tend to cause inordinate delays in sanctioning of projects and eventually give scope for corruption.
Although injecting crores of rupees in new infrastructure projects to kick start the economy makes sense, it makes more sense to review the current infrastructure projects, the status whether they were completed on time and budget. It will be probably come as no surprise that some of the existing infrastructure projects have neither been completed on time nor in budget. Significant amounts of funds would have been siphoned off by corrupt contractors and key people managing these projects. In summary before commencing on new projects it is important an independent review is conducted on the existing projects and get key learnings from this. Starting new projects without proper review is pumping more money into the pockets of corrupt people.
In last eight years of governance for the first time it appears that govt is willing to walk the talk. An unholy dovetail of external and internal economy and polity has taken our economy to the abyss. I won't hasten to conclude that another 1991 is just round the corner but at the same time I am afraid that two years of slowdown of economy may forge into meltdown. It was never that there was policy paralysis as is frequently suggested by opposition and touted by media also. I would rather say its implementation indecision and indecisiveness at core issues that has halted the process of economic development. e.g. we don't have any stated mechanism for allocation of coal block, which plays rear wheel role in infrastructure growth. No Himalayan policy shift is needed rather small corrective measure are required with an intention of delivering the promise. UPA2 now seems aware that bad economics affect the politics. Leave behind populist measures and take some reformist measures.
Where was our PM all these seven years? Had he no time to kick start the infrastructural growth to boost our economy? 2014 is nearing and Congress is in the grip of fear. It cannot fool the people for all the time.
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