LIMITATIONS OF INFRASTRUCTURE DEVELOPMENT IN INDIA

1
LIMITATIONS OF INFRASTRUCTURE DEVELOPMENT IN
INDIA
By Ravi K Mehrotra CBE Executive Chairman
Foresight Group, London
India Calling 2009 India-Europe Business
Partnership Summit 1st October 2009 European
Parliament, Brussels, Belgium
2
LIMITATIONS OF INFRASTRUCTURE DEVELOPMENT IN
INDIA

• It has been well said by the World Bank experts
  that a countrys progress from underdeveloped to
  a developed nation depends upon growth of its
  infrastructure.
• 3I Networks of India put out a report in 2004
  about Indias infrastructure that says even
  relative to income, our failure in water, roads,
  sanitation, schooling and electricity is woeful.
• It is a miracle and credit to Indias youth and
  its industrialists that during the last 5 years
  we managed a 7 annual growth. This has brought
  the country to a stage where it has become
  imperative for both the Government and Industry
  that further growth is difficult unless the
  nation accelerate the development of
  infrastructure.
• If we do not do this, India will remain a
  country which houses the worlds maximum number
  of poor people below poverty line (between 250
  300m), no matter how much we shout that growth
  has to be all inclusive, it will have no effect
  on the acceleration of growth and disparities
  will increase between the rich and the poor.

3
LIMITATIONS OF INFRASTRUCTURE DEVELOPMENT IN
INDIA Contd

• Whereas it is well recorded history that in the
  USA, President Eisenhower in the early 1950s
  first built the infrastructure i.e. ports,
  railways, roads, highways, airports and
  communications and we all know that growth
  followed. Recently Chinas success clearly shows
  that 50 years later, the premise is still valid.
  Even our own experience of making Indias first
  Quadrilateral road network shows Indias GDP
  growth increased by about 1.5 additionally.
• Therefore lets see what India has planned for
  its infrastructure growth in the next five years
  and what it requires-

4
TRADITIONAL MEANS OF DEVELOPMENT

• 10 dos for a country to progress from
  underdeveloped to a developed nation-
• You should be able to travel quickly and safely
  all over the country (or most of it)
• You should be able to communicate quickly,
  efficiently and cheaply
• You should be able to drink water safely and
  breathe fresh air throughout the country
• You should be able to educate and train youths in
  all parts of the country so that they innovate
  what they do
• You should be able to mobilise quickly skilled
  labour force in any part of the country
• You should be able to do efficient utilisation of
  resources to reduce the capital cost of
  production, especially main resources such as
  water, raw material, electrical power and
  petroleum products
• You should be able to move money efficiently and
  quickly where it is required
• You should be able to move goods efficiently and
  cheaply within and outside the country
• You should be able to store efficiently, cheaply
  and without damage to commodities, raw materials
  and finished products
• Lastly, there needs to be an abundant consumer
  market for what you produce

5
TRADITIONAL MEANS OF DEVELOPMENTContd

• We are already good in at least four of the above
  10 dos-
• Communication
• Education to innovate
• Able to mobilise Skilled Labour all over the
  country
• And have an Abundant Consumer Market.
• We need to tick at least 7 out of the 10 dos to
  make a difference

6
LIMITATIONS OF INDIAN DEMOCRACY AS IT IS TODAY

• Our majority vote bank reside in villages and
  therefore any growth has to be inclusive. We
  cannot follow the same path as some countries did
  i.e. Japan, South Korea and now China, they
  developed coastal areas first to create a
  critical mass for the development and then
  dispersed it in the whole country. India has bad
  experiences of its 1st five year plan where
  growth was initiated in the North and South only,
  and discontent developed in other parts of the
  country.
• Our industrial houses are not able to follow
  examples of Japans Keiretsu Zaibatsu, South
  Koreas Chaebols and Russias Oligarch type of
  focus on development and hegemony of
  industrialisation. India is too diverse for this
  kind of growth.
• Our ingrained Raja and Babu culture since the
  Ashok Gupta dynasty 2000 years ago has made us
  expect all top to bottom approach in growth so
  Indias growth largely depends on the political
  climate at any given time (todays equivalent of
  Raja are our politicians).
• Our cultural difficulty in which bankruptcy has
  a very negative connotation which develops a fear
  of failure culture in oneself.
• Our country, due to the above 4th point has a big
  vacuum of venture capitalist institutions
  hence, growth of entrepreneurial class is very
  limited at present.

7
CHINAS Development Its Comparison with India

• China reminds me a little of Germany in the 20th
  century and in the Industrial revolution very
  organised, very focussed and determined to
  leapfrog everybody. Chinese engineers are very
  good at reverse engineering.
• India reminds me of Italy in the early 19th
  century with its creativity, individualism,
  talent, spirituality, respect of its cultural
  heritage and systemic chaos. It is not by
  accident that India produces herds of very
  talented software developers as it takes a fairly
  unstructured thinking to excel in this field.
  Dozens of bio-tech start ups, founded by Indians
  leveraging the most diverse genomic pool in the
  world. I believe that beyond software, India will
  become a world power in biotech.
• India is a multi-party democracy. China is a
  single party controlled state. Indias population
  is slightly lower than Chinas at present but
  growing faster . By 2025 India will overtake
  Chinas population. Migration of Indians to other
  countries is six times larger than that of China.
  China has three times the land area and twice the
  coast line of India but the total arable land is
  the same for both countries. India has the fourth
  largest coal reserve in the world, while China
  has the worlds largest hydropower potential.
• At the end of the day , China and India will
  probably follow their DNA and develop themselves
  very differently. Two great countries, two great
  histories, two great cultures. The remaining
  question will be how the US and Europe maintain
  their privileged economic positions in this race?
• The following few slides give you the
  statistical differences in these two great
  economies

8
GDP Growth 2000 to 2050
Source Goldmann Sachs The Path to 2050
9
FDI ATTRACTIVENESS CHINA Vs INDIA

• China India Governance Indicators

• China India Obstacles in Doing Business
  Indicators

The 6 Governance Indicators are measured in
units ranging from about -2.5 to 2.5, with higher
values corresponding to better Governance
outcomes. Data has been rescaled to 0-5 for ease
of understanding.
Higher Score More Rigid Labour Laws
10
INDIA CHINA GDP

• China India Real GDP growth (in percentages)

• China India Nominal GDP (in US billion)

Last 30 years GDP growth
Last 30 years growth in nominal GDP
11
REVENUE EXPENDITURE CHINA INDIA

• China Central Government Revenues Expenditures
  as a of GDP

• India Central Government Revenues Expenditures
  as a of GDP

12
SECTOR-WISE BREAK-UP OF ECONOMIESCHINA INDIA
Indias 54 of population is engaged in
Agriculture but only accounts for 17 of GDP
13
POTENTIAL GROWTH IN INDIAS OIL DEMAND
For India to become a developed nation its
consumption has to reach at least 1.0 tonne per
person per annum. This means 22 million barrels
of oil per day. Some alternative energy resources
may reduce this consumption by 10.
14
GROSS DOMESTIC SAVINGS CHINA INDIA

• China India Gross Domestic Saving as a of
  GDP

15
INFRASTRUCTURE INVESTMENTS
Transport, Communication Power
Source China Statistical Yearbook, RBI, Morgan
Stanley Research
16
COMPARISON CO2 EMISSIONS PER TONNE-KILOMETRE
TRANSPORTATION
SEA
ROAD
AIR
RAIL
x1
x5
5gms CO2 per tonne/kilometre
x10
x108
Source British Chamber of Shipping
17
WHAT IS INDIAS PRIORITY IN INFRASTRUCTURE?

• It is an established fact that for a nation to
  develop fast it has to invest more than 20 of
  its GDP on its infrastructures i.e. roads, sea
  ports, airports, railways, power, communication,
  water management and sewage disposal systems.
• India at present invests 5.5 of GDP on this and
  it has planned to increase this in coming years
  to 9 of GDP. Government believes it will give
  the country a good chance to raise its growth
  from present 6 to 9 of GDP. It is a step in the
  right direction but woefully inadequate.
• Indias planning commission within a few years
  has to rethink and raise this substantially if
  the Government is serious about reducing the
  poverty in general, and about its growth to be
  inclusive.
• However, allocating the funds to infrastructure
  is not the only requirement. It has to streamline
  various other issues such as various clearances
  which are required before a project can take off
  otherwise allocated funds will remain unutilised.
• What is needed is for Government to establish
  single window organisations for each of the
  defined infrastructure industries. They should
  have clear guidelines that all approvals have to
  be provided say within 90 days of application. To
  ensure this happens employees of these
  organisations have to be made accountable.

18
DEVELOPMENT OF INFRASTRUCTURE

• The fast growth of the economy in recent years
  has placed increasing stress on physical
  infrastructure such as electricity, railways,
  roads, ports, airports, irrigation and urban
  rural water supply and sanitation. All of which
  already suffer from a substantial deficit from
  the past in terms of capacities as well as
  efficiencies in the delivery of critical
  infrastructure services. The pattern of inclusive
  growth of the economy projected for the Eleventh
  Plan with GDP growth averaging 9 per year can be
  achieved only if this infrastructure deficit can
  be overcome and adequate investment takes place
  to support higher growth and an improved quality
  of life for both urban and rural communities.
• So the Question is How can India leapfrog this
  Infrastructure development requirement as it did
  10 years ago in mobile telephony?

19
INDIA IS BESTOWED WITH A GEOGRAPHICAL MIRACLE

• In the world, the Indian subcontinent is a
  geological wonder. In the South it has the vast
  Indian Ocean with no hindrance to wind flow,
  which provides all the moisture and in the North
  it has more than 2000 km of Himalayan mountain
  range with average height of 20,000 ft (above sea
  level). The Indian Ocean precipitates moisture on
  the subcontinent, as the Himalayas act as a great
  wall to prevent its escape. This rainfall is
  called monsoon (which in Arabic means Northerly
  Winds from the South).
• This is the reason that the Himalayan mountains
  has the third largest store of fresh water (snow)
  apart from the North South Poles, in the world.
• Himalayan snow glaciers feed 14 rivers both into
  India and China which have water from melted snow
  for 365 days. India has the maximum as it gets
  75 of this precipitation.
• So the question we have how to harness this
  freshwater bounty from nature? One does not need
  to consume huge amounts of fossil fuel to
  desalinate seawater which increases carbon
  footprints on our planet.
• Presently India receives roughly 4 trillion cbm
  of rainfall every year. But only 48 of this
  rainfall ends up in Indias rivers. Just 18 of
  it is gainfully utilised for agriculture and
  human consumption in the subcontinent, the
  balance is wasted.
• So the answer lies here Technological feat for
  our scientists and engineers on how to harness
  80 of this monsoon precipitation to retain
  instead of just 18 at present.
• It is estimated that this will add to Indias
  existing GDP growth of 6 by another 5.2 making
  it the worlds fastest growth in history.

20
INDIA NEEDS CIVIL TECHNOLOGICAL LEAP TO HARNESS
NATURES BOUNTY AND IN THE PROCESS, DEVELOP ITS
INFRASTRUCTURE

• The interlinking of all rivers
• This project was conceptualised in 2002 and
  planned completion due by 2016 but has yet to see
  the light of the day.
• The project involved linking 37 rivers in India
  by thousands of miles of canals and dozens of
  large dams.
• This feat alone will increase the rain catchment
  from present 18 to 50 as canals will move water
  from surplus to deficient regions also helping to
  avoid floods.
• Rainwater harvesting in cities will enhance
  quality of water available to city dwellers and
  help increase sub-soil water. This has to be made
  compulsory for all cities above 5 million
  population. This will add 10 of rainwater
  catchment.
• Construction of dams in linking rivers, will
  generate 34,000 MW of hydro power which is
  pollution free and does not increase carbon
  footprint.
• Creation of lakes and ponds around the cities
  where rainwater can be drained, helps to raise
  the water table of sub-soil as well as moderating
  the temperature of cities thus reducing the use
  of air-conditioning.

21
SUMMARY

• It will still take time to sort out the
  distortions in its society, economy and
  bureaucracy.
• Our ingrained Raja Babu culture requires a
  new paradigm in order to uplift the Nations
  infrastructure.
• Our education system has to undergo a change
  where emphasis should be on Innovations of what
  we do.
• Societies blot against bankruptcy has to be
  softened in order to create more entrepreneurs.
  In a country of 1.1 billion people we need a lot
  more entrepreneurs to give a fair chance of
  success in all inclusive growth.
• Country needs some audacious programmes in civil
  construction which can involve the imaginations
  of the whole nation.
• As we are proud of our history, culture, and
  philosophy let us create some infrastructure in
  todays India for which all of us can be
  similarly proud of such as connecting all rivers
  in the country.
• To show the sincerity of my proposal I offer my
  services as well as those of my organisations to
  this audacious infrastructure development.

22
CONCLUSION

• CAN THIS AUDACIOUS DEVELOPMENT IN
  INFRASTRUCTURE MAKE INDIA SING IN THE RAIN
  AGAIN?......
• AS WE DID TILL THE 16TH CENTURY WHEN THE WORLD
  KNEW INDIA AS A GOLDEN BIRD CONTROLLING 30 OF
  WORLD TRADE.
• Thank you Ladies Gentlemen for helping me to
  bring out a new concept.

23
LIMITATIONS OF INFRASTRUCTURE DEVELOPMENT IN
INDIA
By Ravi K Mehrotra CBE Executive Chairman
Foresight Group, London
India Calling 2009 India-Europe Business
Partnership Summit 1st October 2009 European
Parliament, Brussels, Belgium