Why India needs more than Japan’s help to fix its infrastructure deficit

January 16, 2013
January 16, 2013

India has sent a delegation to Tokyo to try and learn from Japan’s success in building infrastructure such as roads, railways, bridges and electric power.

Tokyo’s help will come in handy. India has a yawning infrastructure deficit. The pace of building has in no way kept up with the nation’s economic growth. As more people buy cars or motorcycles and travel, a quarter of the nation’s roads are congested. Port traffic is burgeoning and airports are strained.

Then again, India needs much more than expertise. Here are the country’s main requirements for better infrastructure.

Bucketloads of cash. According to the World Bank, India needs to spend $1 trillion over the next five years upgrading everything from ports to sanitation. The government has long said the country’s private sector should contribute via public-private partnerships. But high inflation and, consequently, interest rates mean that private firms often take fright at the cost of capital required for hefty, long-term projects.

Less political paralysis and graft. Politicians are too fearful of offending powerful lobbies or big state-owned companies to fight corruption and correct economic distortions. Take the power sector. Regular electricity blackouts can be blamed on politicians skirting much-needed reforms that could, for example, reduced power subsidies to farmers, who, collectively speak with a loud voice in parliament. As much as 40% of electricity is stolen. There isn’t enough coal going to power stations, and though the state-run, inefficient monopoly supplier, Coal India, is being investigated for alleged abuse of its dominance, political efforts to force it to increase supply have so far been ineffective. Meanwhile, states are complaining that Coal India is short-changing them.

Better building standards and less financial waste. In 2010, a pedestrian bridge that formed part of the Commonwealth Games village in New Delhi collapsed. The accident became a shorthand for describing the country’s shoddy building standards. The games also showcased how bad procurement practices lead to vast amounts of financial waste. During the games, companies favored by ministers were given over-priced building contracts without competitive bidding, a report by the Comptroller and Auditor General said.  The bill for the games came in at $4.1 billion. The original budget was $270 million.

Better weather? This problem is debatable. India’s roads are often damaged in monsoons. But it is sometimes argued that road builders and corrupt officials deliberately build roads badly so they will deteriorate in the rain. Such malfeasance creates more pothole-filling work for contractors.

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