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 Development is the Key
Look, India in ruins
The Indian Express, India Friday, November 19, 2010

Bibek Debroy

It is time to take a wider look at the state of our infrastructure. Every civilisation has realised the importance of infrastructure. NREGA doesn’t provide for creation of productive assets (not even for water harvesting), isn’t integrated with other elements of Bharat Nirman and doesn’t provide for maintenance. Thus, the problem is also with the Central template, including for Centrally sponsored and Central sector schemes, writes Bibek Debroy in The Indian Express.

With 2G described as the mother of all scams, it’s time to take a wider look at the state of our infrastructure. Infrastructure means different things to different people. “Infra” is below or under. Therefore, anything that supports the economic structure or system from below is infrastructure. This may mean physical infrastructure, as well as social overhead capital, though more commonly, it is the former. In 1994, the World Bank’s World Development Report (WDR) focused on infrastructure for development and divided physical or economic infrastructure into three heads — public utilities (power, telecommunications, piped water supply, sanitation, sewerage, solid-waste collection and disposal, piped gas), public works (roads, dams, canals) and other transport (urban transport, railways, ports, waterways, airports). To this, we can explicitly add postal services, radio, television transmission and solid-waste management. We also owe a number to that 1994 WDR. One per cent increase in infrastructure stock increases GDP by 1 per cent. Indian figures are higher.


We really mean inclusive development. Several NSSO reports show how bad it is. For example, there is a recent (November 15) report on housing conditions and amenities, with data for 2008-09. To take one example, 18 per cent of rural households had drinking water within premises, latrines and electricity. What is inclusive development? It probably means access to electricity, water (drinking and irrigation) and road transport, together with law and order. If these are ensured, social sector outcomes (schools, primary health centres) will automatically follow. These connectivities were supposed to be ensured through PURA (Provision of Urban Amenities in Rural Areas).This has now been subsumed under Bharat Nirman (water supply, housing, telecom and IT, roads, electrification, irrigation). Is it working? Not convincingly. Every civilisation has realised the importance of infrastructure.


Interestingly, he was a governor of Bihar then. Why did it take us so many years after Independence to realise roads were important? But surely, everything has changed now. There is a Committee on Infrastructure under the PM’s chairmanship, constituted in August 2004. To hammer home the point, there is a Cabinet Committee on Infrastructure, also chaired by the PM, and constituted in July 2009. There is a Public Private Partnership Appraisal Committee, between the Department of Economic Affairs and the Planning Commission. There is viability gap funding and an Inter-Ministerial Empowered Committee for this. The India Infrastructure Finance Company Limited has been created. There are model concession agreements for PPP projects, model bidding agreements, guidelines and manuals. With all this concentrated attention, infrastructure should have taken off.The mid-term appraisal of the Eleventh Plan brings us down to earth. Between the Tenth and Eleventh Plans, infrastructure investment increased from 5 per cent of GDP to 7.55 per cent. However, public investment in electricity has flagged and so have roads, despite a target of 20 km per day and the Pradhan Mantri Gram Sadak Yojana. Railways have underperformed, including on PPP. Airports vary. Except for some private ones, seaports have been underachievers. Water supply, irrigation and other elements of Bharat Nirman are underperformers.


NREGA doesn’t provide for creation of productive assets (not even for water harvesting), isn’t integrated with other elements of Bharat Nirman and doesn’t provide for maintenance. Thus, the problem is also with the Central template, including for Centrally sponsored and Central sector schemes.There are two McKinsey reports (Financing and Investing in Infrastructure, Accelerating Infrastructure Projects) worth flagging. The quality of planning and engineering design is poor. It is common to tender unviable PPP projects. Inappropriate contracts are used. The pre-tendering approval process is centralised and slow. Dispute resolution processes are ineffective. Performance management is weak. There is insufficient availability of skilled and semi-skilled manpower. There are weak risk management skills. Design and engineering skills are below par.


This article was published in the The Indian Express on Friday, November 19, 2010. Please read the original article here.
Author : Mr Debroy is a noted economist, based in New Delhi.
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