Infrastructure is an area which is highly debated upon today. Crores of rupees are being spent on setting up committees and bodies, for carrying out case studies and feasibility reports. But at the end of all this nothing much is achieved and there is waste of precious time and project delays.

Just publishing reports and appointing chairpersons will not solve the problem. What India actually needs to do is to change the mindset of the people emphasising on that if government has to spend crores of rupees it will have to recover some amount of the cost from the people as well who are the one utilise and take benefit from the public infrastructure. User charger concept will have to be clearly defined and fixation should be done in a rational manner. If the government seeks to provide long-term quality infrastructure, there is no reason why the people will hesitate in paying for these facilities. Currently, there is no correlation between expenditure and the growth achieved. Why is this so?

Need of the hour
What basically then needs to be done is the government should delegate its powers and evolve an independent decision making system at the ground level. What is happening today is that the government is taking decisions in right earnest with a long-term perspective too, but its role seems to be ending there. Governments should be involved till the last step of clearing projects and see to it that they take off. What usually happens is that projects get announced but do not get commissioned. This has been happening because basically the entire administrative setup is faulty and loopholes exist at every stage. Hence, single-window clearance is the only solution. Bureaucracy and red tapism should be eliminated to make projects viable.

Progress so far
Realising the severe shortfalls in the development of infrastructure, the government has taken several measures to boost investments into this sector. These include: uniform tax holiday of 15 years for all infrastructure projects, creation of Foreign Investment Implementation Authority to smoothen the flow of FDI into the sector and most importantly the import duty structure for project imports has been rationalised.

Infrastructure is closely related to the overall development of the economy and simultaneously overall growth is dependent on the quality of infrastructure. A look at the adjoining graph clearly shows that the growth pattern is not very impressive and pick up will have to be faster if India is set to achieve a GDP growth in the eight per cent range. Indian forecasts have become the laughing stock the world over because they are not based on realities and every year there is a major slippage which is nowhere close to the announced forecasts.

How closely growth and infrastructure is linked is very difficult to estimate. But the two complement each other. As economic output increases infrastructure should also go hand in hand. But, that is not happening today. Traditionally in India infrastructure was the prerogative of the centre/state governments and was heavily subsidised with long gestation periods which made it unattractive for private sector entry. Stress by the government was more on public utility and not financial viability which drained the system of precious resources which could be further utilised to develop other public services.

Major providers
Today the government has set upon its task of achieving high growth targets but with very weak foundations. How will the government achieve its targets ? Well it will have no other option but to depend on the private sector to come in as a rescuer. It will have to remove the entry barriers and make investment more lucrative for domestic and international investments. Realising that government will not be in a position to bear such a huge financial burden, it has opened its gates to private investments in once restricted sectors like ports, railways, telecommunication and to a small extent in the aviation sector. Not only is it aiming at developing new infrastructure, but it has announced that it will take its disinvestment programme very seriously and will put up the PSUs for sale which the private sector can take up and help in improving the existing infrastructure. In this way growth can be further accelerated and costs can be brought down provided the system functions in a cost effective and transparentmanner.

Every year the budget document carries pages on further measures to liberalise this sector. As Indian boundaries are vast there is a huge untapped potential for developing this sector as the Indian market is very large.

Investment needs
The government is doing its best in attracting foreign investments in this sector as it has realised that it is only foreign investment that can help solve the resource crunch. Rakesh Mohan in his Infrastructure Development Report has estimated that there is potential for investments to the tune of US $115-130 billion over the next five years (1998-2002) and US $215 billion in the following five years (2002-2006). A look at the foreign inflows shows that they have practically dried up and are being diverted to the South East Asian countries which do not have a sound economic background in comparison to India.

Why is this happening now especially at a time when India is being viewed as the most favoured destination. One main reason is the dilly dallying by the government in taking policy decisions and complicated legal and financial disclosure norms which the foreigners are not very comfortable working with.

Hence, despite the government opening its gates, it is failure of the system that makes all efforts go waste. Infrastructure projects usually take around 2-3 years for them to become productive. But, if at the initial stage itself a project gets delayed, its future costs get cumulative and the project becomes unattractive. This is why many projects have got shelved. This is in light of rapid technological changes taking place the worldover and where India is not in a position to compete.

Sheer inefficiency
Infrastructure is one sector where huge investments are promised by the government. But, as is the case always the government shirks away from committing these funds blaming it on some unforeseen natural calamity or the other and slashes the public investment earmarked for infrastructure. The government still has not learnt from its past mistakes and refuses to accept the fact that unless and until adequate infrastructure is not in place, growth will not be achieved.

There is a consistent pattern that emerges if one looks at the infrastructure trend since 1991. There is severe shortage of infrastructure requirements as juxtaposed to the huge hype of investment needed. Short-term steps are taken and MoUs are entered into a hurry. The power sector is the best example. It was the first sector to liberalise. But even after a decade India faces a severe power crunch. At the outset there is a lot of interest generated in a project. But once a project gets mired in controversies at the time of presenting the feasibility reports wherein kickbacks, corruption charges get exposed by the media, the project is said to be unviable.

But at the same time there is no denying the fact that many projects have reached fruition. Even as this may be true the amount of time spent on discussions and feasibility reports do not match the minuscule investment that actually flows in. A look at public sector projects reveals that they are known for cost and time overruns. In fact, the government is prompt at regularly publishing reports and articles about time overruns which over the years have been worsening from 6 month periods to around 250 months. Why is this happening ? Well, one can only cite two reasons: corruption and inefficiency.

Basic need
The International Monetary Fund (IMF) in its recent Asian report has said that India is in a position of attaining a 6.5 per cent GDP growth provided it checks out on fiscal consolidation, globalisation and privatisation to give a boost to the reforms process and makes efforts to attract higher FDI. All is well said and done but implementation is where India fails miserably. India has all the potentials of attracting investment, is richly endowed with natural resources and has a very powerful labour force. So for India to take off the mark it will have to plug all the loopholes in the system.

A UNDP report on human development in South Asia mentions that if corruption in India is bought down to that of the Scandinavian countries, its GDP will go up by 1.5 per cent and FDI will go up by 12 per cent. Transparency in the process making activity will also help eliminate many hurdles hampering project implementation. It suggests that an authority be set up to look into the lacunae that result in corruption for individual projects and solutions be found. This will reduce time and cost overruns and make projects economically more feasible.

The current budget seems to have set the ball rolling and the finance minister is confident that the measures announced will help in World Bank and other International funding bodies finance infrastructure projects. India has consistently argued that the logic of making an artificial distinction between basic human need projects and others was a fragile one. Yashwant Sinha has gone on to argue that if employment was a basic human need then roads and electricity projects that generate such a potential too should come under such a definition of basic human needs. Today, the world is recognising this point of view and hopefully it should see investments flowing into the country in the future.

For India to move ahead it will have to remove all existing impediments an get prepared to face global competition. Today it is not that infrastructure has not progressed but the pace is slow. India should make good use of the opportunities thrown up on account of the prevailing favourable climate which will slacken if infrastructure is not given a boost. Since both are mutually dependent on each other: a boost to infrastructure development with enhance the pace of achieving higher GDP growth.

IMF in its latest assessment has stated that India will be able to achieve a 6.5 per cent GDP growth going by the present conditions. The government will have to take a cautious look at the fiscal situation and focus on globalisation and privatisation and give a boost to foreign direct investment if it has to scale the higher growth ladder. At present, despite foreign direct investment drying up there seems to be no real worry about the slackening pace.

The real concern is that India still functions in the dark ages where there is interference at all levels and there is no state autonomy. As against this foreign investors the worldover are work in a professional manner and where there is no cumbersome paper work and multi-level functioning. But that is not the case with India despite having the latest technology and high speed communication.

In such an environment foreign investors are hesitant to invest here where the future policies appear to be very bleak and susceptible to change. It is about time then that the government wakes up to the ground realities and changes to remain competitive.

If India wants to become an active player in the global world market it will have to not only announce policies for opening up of the economy, it will have to implement the same.

Today the South East Asian economies who were in the doldrums are today better performers than India and are attracting more FDI despite having low growth rates than India. Why is this so?

Infrastructure which they provide is far more superior and is the only factor that is attracting foreign investors to this land despite unsound labour, legal and judicial setups.