Getting team India to win again – infrastructure

India’s massive investment in infrastructure is evident everywhere. The New Delhi metro, often packed to capacity and inexpensive for commuters, is clean and efficient. New highways, many still works in progress, are starting to link the major cities. But India is moving down the World competitive index ranking. Having once been ahead of both Brazil and South Africa, it now ranks 10 places lower. Business leaders cite Infrastructure as the single biggest hindrance1 for doing business, ahead of corruption and bureaucracy.

India’s subsidy policies have distorted infrastructure challenges. An example is the rail subsidy. Fares are heavily subsidised, and the cost apportioned to the goods that are carried by rail. Shipping companies have calculated that it’s cheaper to move goods by road. Heavy goods vehicles are destroying the new highways. Traveling from one city to another by road is a surreal experience seeing small sedans dwarfed by 18 wheel pantechnicons. The little cars cars skirt around the lumbering giants, their passengers praying that their vehicle’s horn is being heard above the cacophony. Not surprisingly road deaths in developing countries are disproportionately higher than in the developed world.

Roads are the dominant mode of transportation in India today. They carry almost 90 percent of the country’s passenger traffic and 65 percent of its freight. The density of India’s highway network – at 0.66 km of highway per square kilometer of land – is similar to that of the United States (0.65) and much greater than China’s (0.16) or Brazil’s (0.20). However, most highways in India are narrow and congested with poor surface quality, and 40 percent of India’s villages do not have access to all-weather roads.

Indian Railways has had the distinction of being one of the biggest and busiest rail networks in the world. It operates 9,000 passenger trains and transports 22.5 million passengers every day of which 53% are suburban and 2.7 million tonnes of freight per day. The Indian Railway employs approximately 1.3 million people. Most of its major corridors have capacity constraints requiring capacity enhancement plans.

India has 12 major and 187 minor and intermediate ports along its more than 7500 km long coastline. These ports serve the country’s growing foreign trade in petroleum products, iron ore, and coal, as well as the increasing movement of containers. Inland water transportation remains largely undeveloped despite India’s 14,000 kilometers of navigable rivers and canals.

India has 125 airports, including 11 international airports. Indian airports handled 159 million passengers in year 20012-2013, a drop of 1.9% for passengers with the previous year. Airport capacity has been increased in recent years, alleviating The dramatic increase in air traffic that frequently made India’s airport chaos hit International headlines in 2007.

Almost 400 million Indians—about a third of the subcontinent’s population don’t have access to electricity. This power deficit, which includes about 100,000 un-electrified villages, places India’s per capita electricity consumption at just 639 kWh—among the world’s lowest rates.

Jawaharlal Nehru, the country’s first prime minister after independence, was obsessed with hydroelectric dams, calling them the “temples of modern India”. It would have been good for India’s environment, and the world’s, had many more temples been raised. The fad for hydro trickled away and it now provides only 14% of India’s power compared with up to a half in the 1960s.

By 2050 India will require 1 terawatt of electricity capacity, a sixfold increase on current requirements. Not tied to legacy technologies, it is an opportunity to put India at an advantage. It also suggests that any procrastination will be costly.

Electricity meters are installed in unexpected places. Power in Dharavi, a giant Mumbai slum, is now largely tolled, with meters nestling next to curing factories piled with goat skins and people melting down used plastic cutlery. But the city, where power is distributed mainly by two private firms, is an exception: almost everywhere else state electricity boards operate the grid, usually badly. They typically lose about a third of the power they buy through theft or inefficient kit, and one executive reckons that up to another third is delivered legally to rural customers who pay subsidised prices or get it free. The result is that a small proportion of customers foot the bills.

Although tariffs are notionally set by regulators, local politicians often hold sway and keep them low to win votes. The legislation that governs power is reasonable but unenforced. The electricity boards haemorrhage cash as a result. They lost $11 billion, excluding any subsidies, in the 12 months to March 2010—the last year for which reliable figures are available.

The consequences are twofold. First, there is not enough money to upgrade the network: up to $200 billion of capital investment is required. And second, if the cost of the power rises because of the expense of imported coal, these outfits are neither strong enough to absorb the financial hit themselves nor capable of easily passing it through by raising prices to customers. That means it is their suppliers, the generating companies, that get squashed.

Telephone and Internet
The penetration of mobile phones in developing countries has been credited for a significant part the exceptional economic growth experienced there. Because of its novelty, the impact of broadband Internet is more tenuous. An unpublished World Bank study found that each 10% increase in penetration produced a 1.38% increase in GDP in developing countries (In developed countries the figure is 1.21%)2.

Only 3% of India’s homes have Internet. India spends 1% of it’s GDP on Internet coverage, compared to 2.5% for the rest of the world. The pricing structures for broadband have archaic caps that place restrictions on the amount of data transmitted, frustrating parents of children trying to gain an advantage at school, and the technically savvy. India’s politicians as a group are the world’s oldest, many octogenarian, and in these policies the gap of generations is most evident.

More at:
Getting team India to win again
Getting team India to win again – poverty
Getting team India to win again – The 1991 financial crisis
Getting team India to win again – fiscal consolidation
Getting team India to win again – the plan
A price worth paying
Broadband: A Catalyst for Small Business Growth
Broadband Beats Mobile Phones in Boosting GDP
Chaos at airports
Chaos at New Delhi airport highlights India’s infrastructure woes
Concrete jungles
Eureka moments
Everlasting light
Halfway to paradise
High-speed Internet plans in India
Ideas coming down the track
India Infrastructure
India still out of the Net
India Transport Sector
Poor countries have half the world’s cars but almost all of its fatal car accidents
Tech-Starting the Innovation Economy
The future is black
The Kudankulam conundrum
The long view
Understanding Energy Challenges in India
Unleashing the Potential of Renewable Energy in India
Why only 3% of India has home internet access

  1. The Global Competitiveness Report 2012–2013 pg30 []
  2. Broadband Strategies Handbook pg5 []
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