BATCH 2019-24

FINAL DRAFT:
SUBJECT: Law on Infrastructure and Development
TOPIC- “INDIA’S ECONOMIC FORTUNE: THE
ROBUST FRAMEWORK OF
INFRASTRUCTURE”

SUBMITTED TO: SUBMITTED BY:

MS. Swati Vishan MUDIT BALIA
Assistant professor Roll NO. 92121040003
Faculty of law, Marwadi University B.A. LL.B (Hons) (VII Sem)

1
 DECLARATION

I Mudit Balia guarantee that the work exemplified in this project, titled “India’s Economic fortune: The
Robust Framework of Infrastructure” is my own genuine work completed by me under the Ms. Swati
Vishan, Faculty of Law, Marwadi University. The matter exemplified in this project has not been
submitted for the reward of some other degree/recognition. I assent that I have reliably recognized,
offered credit and alluded to the creators/researchers any place their works have been referred to in the
content and the body of the undertaking. I further guarantee that I have not maleficently plagiarized some
other's work, section, text. information, results, figures and so forth detailed in the diaries, books,
magazines, reports, papers, theories, and so on, or accessible at sites and encompassed them in this
project and neither quoted them as my work

Signature of Student
Date:

2
 SUPERVISOR’S CERTIFICATE

This is to affirm that the work encapsulated in the going project named “India’s Economic fortune:
The Robust Framework of Infrastructure” has been completed wholly by Mudit Balia under my
direction and assistance and that the applicant has satisfied the necessities of the guidelines set down
for the satisfaction of BA.LLB. (Hons.) Degree assessment throughout Infrastructure and Development
(Semester VII), Faculty of Law, Marwadi University.

3
 ACKNOWLEDGEMENT
I want to convey my gratitude to individuals, who have helped me most all through my task, be it
straightforwardly or by implication. I'm generally thankful to my professor Ms. Swati Vishan who really
propelled to do this assignment by giving this chance. Also, a thank of mine goes to my companion who assisted
me finishing the assignment, where they all traded their own fascinating thoughts, and caused me to
acknowledge both the points of view to the issue and along these lines madeit conceivable to finish my task with
all exact data. I wish to thank my folks for their own help or consideration who roused me to head out in a
different direction. Last but not the least, I would likewise stretch out my appreciation to the individuals who
couldn't be referenced here yet all around assumed their part to motivate the drape.

4
 INDEX

CHAPTER 1- INTRODUCTION.................................................................................................... 6

CHAPTER 2- INFRASTRUCTURE- THE GROWTH BOOSTER...........................................9

CHAPTER 3- PRIVATE SECTOR PARTNERSHIP .............................................................. 10

CHAPTER 4- CHALLENGES TO INFRASTRUCTURE DEVELOPMENT ...................... 12

CHAPTER 5- OVERCOMING THE CHALLENGES TO

INFRASTRUCTURE DEVELOPMENT .................................................................................... 16

CHAPTER 6- CONCLUSION ..................................................................................................... 18

5
 INRODUCTION
Infrastructure is the foundation of any economy. The extent and quality of infrastructure determines a
country's ability to capitalise on its comparative advantage and enable cost competitiveness. Given the
strong backward and forward linkages and positive externalities generated by infrastructure, it has the
potential to be a vehicle for social and economic transformation the level of human and economic
development of a country is closely related to its achievement in physical and social infrastructure. While
physical infrastructure is an important determinant of domestic production, good social infrastructure is
essential for human development as well as economic progress by producing more educated, skilled, and
healthy citizens.

India's ambition to maintain its relatively high growth rate is dependent on one critical factor:
infrastructure. However, the country is plagued by a deteriorating infrastructure that is incapable of
meeting the demands of a growing economy and population. According to S&P Global Ratings, India's
GDP will grow at a rate of around 6.7% over the next three fiscal years, ranking among the fastest among
large, growing economies. The government also intends to significantly boost the manufacturing sector,
which currently contributes less than 17.4% of GDP, to an all-time high of about 20% by 2025.
At a time when manufacturing powerhouse China is shifting toward consumption-led growth, India is
attempting to improve its manufacturing competitiveness. China is now at risk of overcapacity in areas
such as port and power. In contrast, India's path to sustainable higher growth and a competitive
manufacturing sector is paved with robust and dependable national infrastructure, particularly in power
and transportation.

6
 Review of literature

1. Pradeep Agarwal in his Research paper titled “Infrastructure in India: Challenges and the Way
Ahead” stated that Good social and physical infrastructure is critical for rapid economic growth,
human development, and poverty reduction. Thus, this study compares the levels of development
of India's social and physical infrastructure with those of other major emerging and developed
countries. According to the study, India lags significantly behind other emerging countries in
terms of access to and quality of health care, education, and vocational or skill training, which is
likely one of the reasons India has been so slow to eliminate poverty. Similarly, India's physical
infrastructure lags behind that of other emerging countries, particularly in terms of electricity
access and consumption per capita, internet access, level of air travel, and sea port quality. Given
the urgent need for rapid development of our social and physical infrastructure, the study attempts
to identify key challenges to infrastructure development and discusses some potential solutions.
2. Meenakshi Sinha under his Article “Infrastructure development: Current bottlenecks and way
forward” stated that Infrastructure development continues to be a major impediment to India's
economic development. Given the government's fiscal constraints, private financing for
infrastructure provisioning via public-private partnerships has become essential. She discusses
the challenges and issues of public-private partnership agreements in this post, as well as the need
to investigate alternative land acquisition pathways that benefit all stakeholders.
3. S.K. Khanna in his Article “Infra Development: The way Forward” stated that The burgeoning
infrastructure market offers numerous lucrative business opportunities to foreign players who can
assist in scaling up strategic projects awaiting investment. Broad-based private and public sector
investment in infrastructure development necessitates collaborative efforts from all stakeholders.
In the coming years, the infrastructure sector will set new standards for project management,
timely execution, implementation, and completion of projects, and quality inputs within time and
cost constraints. Translating the government's vision of becoming a USD 5 trillion economy by
2023-24 is a daunting task, but it is doable.

7
 Aims and Objectives

1. To analyze the present condition of Infrastructure in India.

2. To analyze whether Infrastructure development is critical for improving India's manufacturing
competitiveness and achieving higher growth.
3. To analyze whether successful infrastructure development can provide a boost to many sectors,
including steel, cement, auto, real estate, and others.

Statement of Problem
There is a need to study current infrastructure development of India and how Development of
Infrastructure will lead to the growth of Economy of the country.

RESEARCH METHODOLOGY
The proposed methodology for the proposed comparative study is doctrinal methodology, which will be
carried out in a descriptive manner and will comprise consulting numerous books, journals, websites,
and publications to obtain information on the issue. The majority of the study will be done through
various internet sources. Throughout my assignment, I will do a thorough examination of the readings
of numerous articles and case laws, and only the most appropriate and relevant material will be described.
The researcher will also look through Literature and current news, and all pertinent material will be
written down.

TENTATIVE CHAPTERISATION
1. Introduction
2. Infra sector – the growth booster
3. Private sector participation
4. Challenges to Infrastructure Development
5. Overcoming the Challenges to Infrastructure Development
6. Conclusion

8
 INFRA SECTOR- THE GROWTH BOOSTER

Infrastructure is the key sector of the Indian economy. The Government of India always places a strong
emphasis on the sector as it is very essential for the overall growth of India. Power, bridges, dams,
highways, railways and urban infrastructure development are all included in the infrastructure industry.
The Government of India through various policies tries to create an intense push to ensure world-class
infrastructure in India, making it India’s new identity. The country is currently an epicenter of new
generation infrastructures such as smart cities, smart highways, and airports, for which the government
has set an ambitious budget of over 100 lakh crores over the next five years. This will boost several
sectors, directly and indirectly create new jobs, and eventually boost the commercial market, propelling
the country's economic growth.

Most economists and even multilateral agencies expect the current slowdown to subside as the effects of
recent measures take effect. Former RBI Governor Bimal Jalan stated at a meeting that the current
slowdown in the Indian economy is cyclical and that growth will pick up in one or two years with the
government's economic recovery plans and strategies.

Some Recent Investments & Initiatives in the Infrastructure Sector By the government

 In June 2022, the ministry of Road Transport and Highways opened 15 national highways projects
worth Rs. 13,585 crores in Patna and Hajipur, Bihar.

 The Dubai Government and India signed a contract to build infrastructure in Jammu and Kashmir
including industrial parks, IT towers, multipurpose towers, logistic centers, medical colleges and
specialized hospitals.

 The Indian government has allocated Rs. 10lkh crore to improve the infrastructure sector, giving it
a significant boost.

 The NHAI received a budget of RS. 1,34,015 crores from the government.

 To buyild and improve the nation’s telecom infrastructure the government gave the department of
Telecommunications a budget of Rs. 84,587 crores.

 Over the next there years, 100 PM-GatiShakti cargp Terminals for multimodal logistics facilities
will be build.

9
 PRIVATE SECTOR PARTNERSHIP

When there is a potential to take advantage of the private operators' operational and administrative
efficiencies (such as the technical expertise and managerial competencies of commercial operators),
increased competition, and enhanced services to end-consumers, the involvement of private operators has
a significant advantage over publicly run projects. Even where the public sector has access to cheaper
funding than private companies due to credit ratings, the efficiency gains from private sector participation
may outweigh the additional financing costs. When there is an opportunity to benefit from private
operators' operational and administrative efficiencies (such as commercial operators' technical expertise
and managerial competencies), increased competition, and improved services to end-users, the
involvement of private operators has a significant advantage over publicly run projects. Even in cases
where the public sector has access to lower-cost financing than private companies due to credit ratings,
the efficiency gains from private sector participation may outweigh the additional financing costs. The
private sector's interest in large infrastructure projects is primarily motivated by expected financial
returns. To encourage private sector participation in achieving the government's inclusivity goals, policy
interventions, regulatory frameworks, and both financial and non-financial incentives can be developed.
In order to address any sectoral market concerns as well as the needs of the beneficiaries, incorporating
inclusivity into infrastructure projects will necessitate additional effort.

To increase the participation of vulnerable or marginalised groups in infrastructure project employment

opportunities, specific efforts can be made to address market entry barriers and potential discrimination
faced by small and medium-sized enterprises owned by women or other minority groups who want to
participate in projects but face barriers in accessing them.

In emerging markets, the private sector accounts for about 20% of infrastructure investment, compared to
70% in developed economies.1 This disparity can be attributed to a number of factors, including concerns
about political stability, corruption, and a lack of a stable, transparent, dependable, and mature
legal/regulatory environment. The government bears a significant amount of responsibility for creating a
predictable enabling environment to attract private sector participation.

Increased private sector involvement in major infrastructure projects can have several benefits when
properly managed. For starters, it has the potential to accelerate or expand infrastructure development that

1
Closing the financial gap (Chua, Lee, and Chalmers, 2017)
10
provides critical public services. As countries and cities struggle to provide universal access to basic
infrastructure and services, whether due to an inability to deliver such services efficiently or a lack of
sufficient financing, private sector involvement in infrastructure can bring innovation, expertise, and a
source of much-needed finance. Second, infrastructure development can benefit businesses by increasing
commercial opportunities (engineering and construction) or production capacity (manufacturing
equipment, materials). Finally, infrastructure investments have a strong, complementary relationship with
human capital growth; some of the indirect benefits of infrastructure projects include job creation and
upskilling local workers. As a result, investment decisions should be based not only on a specific
infrastructure project's immediate economic impact, but also on its potential to create long-term jobs and
economic growth, taking into account indirect benefits.2

2
A sourcebook for poverty reduction strategy, (Klugman., et., 2002)
11
 CHALLENGES TO INFRASTRUCTURE

1. Financing

Finance is the backbone of any infrastructure project, and thus of a country's economic development.
Because of characteristics such as large initial investment, bulk purchases, high-value equipment,
advance payments, long gestation period, and high political, policy, and procedural uncertainties,
infrastructure financing faces significant regulatory, macroeconomic, and institutional constraints. In
comparison to other sectors, India's rate of infrastructure investment is significantly lower. Due to a
variety of factors, including the long-term payback period, the financial closure rate is concerningly low.
The primary goal of any business is to make money, and infrastructure projects have a long payback
period due to their long-term financing structure, which often results in a decrease in short-term profits.

The main issue in Indian infrastructure financing is not a lack of savings, but rather a lack of adequate
financial intermediation and inadequate mobilisation of savings into the infrastructure industry. The
following sections address the issues surrounding infrastructure financing. First, infrastructure projects
face numerous risks, such as delays in clearances, policy changes, and so on; with each event causing a
delay in project implementation or continuation, both cost and time overruns increase, and project techno-
economic viability suffers. Because of these delays, the project's entire financing is jeopardised. a
financing structure, which frequently results in a reduction in short-term profits. Second, monopolies
dominate infrastructure development in India. To prevent the abuse of monopoly power, the government
attempts to maintain control. The legal arrangements made ensure risk sharing and proper payoff
distribution. Third, when conventional financial tools are used for project evaluation, lending capacity is
hampered. Fourth, lenders' and investors' limited investment horizons are an issue; for example, for most
infrastructure projects, 10-15 years would be the peak period, whereas the time given is around 7-10
years.3

2. Banks

Banks play the most important role in financing; however, they do not expand their capital due to factors
such as limited balance sheet size, a lack of willingness to lend to infrastructure sectors, and dramatically
increasing non-performing assets. The main issue is commercial banks' inability to extend long-term

3
Anup Kapadia, Role of Capital Market in Financing Infrastructure Projects, https://www.primedatabase.com/Article/dir-
99ar7.pdf (last visited on Oct 3, 2022)
12
loans to the sector; the long gestation period in comparison to banks' shorter-term recourse base leads to
an asset-liability mismatch. Furthermore, the Indian corporate bond market is far from meeting adequate
financing standards.

3. Private Sector

Private financiers frequently engage in overly aggressive bidding without performing adequate due
diligence, resulting in unviable offers. They face challenges such as insufficient provisions for contractual
and legal challenges such as changes in the scope of events, default by parties, exit clauses, and
connectivity infrastructure. A decrease in project developers' ability to inject equity has resulted in more
over-leveraged balance sheets. When loans are delayed, they become non-performing assets (NPAs),
which reduces the capacity to lend to the infrastructure sector. Because of its long gestation period, debt
financing is the best source of finance for the infrastructure sector. This activity is primarily governed by
the banking system and non-banking financial institutions (NBFCs). Following the dramatic increase in
NPAs in the banking sector, the infrastructure sector turned to NBFCs for financing. However, in recent
years, NBFCs have suffered the same fate as the Indian banking system4, with NPAs in NBFCs
increasing dramatically, particularly following the IL&FS default in 2018. The suspected increase in
NPAs in NBFCs reduced banks' willingness to lend to NBFCs, affecting capital flow in the infrastructure
sector. Developer profit margins have been reduced as a result of cautious NBFC lending and increased
interest rates charged by NBFCs.5

4. Foreign Investors

Foreign investment can assist national and state governments in sharing expertise and learning from
international standards and techniques. For example, while working closely with the Kolkata Metro Rail
Corporation, British specialist contractor Invicta Durasteel shared their knowledge of working on other
metro projects around the world and thus installed Durasteel fire protection barriers in the Kolkata Metro
Line 2 to increase safety measures for passengers. FDI in India even reached a record high in 2021;
however, FDI in Indian infrastructure, particularly the construction sector, has been steadily declining for
several years. This is a nightmare scenario for a developing country like India, and FDI in infrastructure
must increase in order to meet the current government's infrastructure development plans.

4
Joel Rebello, NBFCs staring at a sharp rise in NPAs this fiscal: Crisil, Economic Times (Oct. 1, 2022),
https://economictimes.indiatimes.com/markets/stocks/news/nbfcs-staring-at-a-sharp-rise-in-npasthis-fiscal-
crisil/articleshow/80978874.cms?from=mdr
5
Shephali Kapoor, Impact of NBFC Crisis on Indian Real Estate, https://www.99acres.com/articles/impact-of-nbfc-crisis-on-
indian-real-estate.html (last visited Apr. 3, 2022)
13
5. Public Private Partnership (PPP) Projects
Following the implementation of the 1990s policy regime, the traditional trend of public sector control
over infrastructure development has been depleting. However, PPP projects have only recently received
significant encouragement. The Indian government has taken several noteworthy steps to finance PPP
projects. First, the India Infrastructure Project Development Fund (IIPDF) was established to assist up to
75% of the PPP project development expenses if the projects met the criteria.6 Second, India
Infrastructure Finance Company Ltd. was established (IIFCL) Third, the government's establishment of
Viability Gap Funding (VGF) to fund infrastructure projects was viewed as a beneficial axiomatic
initiative.

Another issue is that many Indian construction companies have declared bankruptcy and are going
through the Insolvency and Bankruptcy Code, 2016. The Calcutta High Court recently observed that the
award holder's claim is distinguished once an IBC resolution plan is passed, which is binding on all
stakeholders involved.7 Many PPP projects are hampered when a project developing company that is a
part of the project is involved in either a dispute with a company that is going through the insolvency or
bankruptcy process under IBC or is going through the process itself.

To supplement Indian infrastructure growth, the government has established various institutions or
funding mechanisms such as Infrastructure Investment Trusts (InvITs), Real Estate Investment Trusts
(REITs), Infrastructure Debt Funds (IDFs), and India Infrastructure Finance Company Ltd. (IIFCL).
Unfortunately, these have not been able to solve the problem of infrastructure financing, owing to
ineffective implementation and operation.

6. Land Acquisition

Control over the land is required for any infrastructure project, public or private, or public-private
partnership. Long, time-consuming, and contentious land acquisition processes discourage and jeopardise
investment. Any investor will risk their capital on a project where an adequate return can be forecasted,
and land acquisition impediments in the first stage of the project should raise a red flag for any investor.
India is still an agrarian economy, with nearly half of the population still living in rural areas and earning
a living from agriculture. Thus, acquiring land for infrastructure projects, which is the primary
requirement, becomes a difficult task, and many projects are delayed as a result. For example, the
Mumbai-Ahmedabad bullet train is expected to miss its 2023 deadline due to land acquisition delays in

6
6 PPP India, FAQs, https://www.pppinindia.gov.in/faqs (last visited Oct. 3, 2022)
7
Sirpur Paper Mills Limited v. I.K. Merchants Pvt. Ltd. (2018) 6 SCC 287
14
Maharashtra. The issue of land acquisition delay can be further divided into two parts: first, the disputes
that arise during the process and the time required to resolve them; and second, the uncertainty of the law
as a result of state amendments and a lack of uniformity.

7. Improper Site Management

Ideally, site management entails three types of work during the construction process: equipment condition
tracking, design integrity, and quality control. Poor management characteristics include hazy
communication, a lack of planning, a lack of support or an inadequate evaluation of progress, and lax
control. Improper communication among project developer levels is a major factor contributing to poor
site management; for example, top management is frequently aware of what is going on at the site. Poor
coordination among various specialists, such as architects, engineers, and other consultants, adds to the
mountain of issues. Employing inexperienced supervisors, incorrect material selection, insufficient
material, lack of site inspection, poor working conditions, few storage facilities, incorrect curing
procedures, lack of supervision, and proper equipment are some of the site management issues. These
issues can be classified as technical, management, or communication issues. Accidents and safety issues
are also caused by poor management. The use of good management software, investment in staff training,
and periodic supervision can all help to address site management issues more effectively.

15
 OVERCOMING THE CHALLENGES OF INFRASTRUCTURE

Infrastructure construction in the developing world faces numerous challenges, including a lack of skilled
labour and knowledge, outdated technology, a lack of engineering and environmental data, and, not least,
logistics due to remote project locations. This is exacerbated further by host governments' demands for a
more sustainable and socially responsible approach from international engineering firms through local
content requirements that aim to maximise use of local resources.

The traditional method of delivering civil infrastructure by sourcing the majority of project requirements
from outside the host country may no longer be viable. Skill shortages in the local workforce and obsolete
technology are no longer considered valid reasons for international companies to avoid using available
local resources. To make matters worse, host governments continue to prioritise the development of
urgently needed physical infrastructure at the expense of long-term capacity building. Local industry and
human resource constraints will persist and worsen as a result of globalisation forces at work.

Over the last decade, major corporations have been leveraging the use of global design centres (GDC) for
cost-effective delivery in generally less developed regions of the world. While the GDC business model is
primarily aimed at maintaining global companies' competitiveness, it clearly contributes to closing the
technical absorption capacity gap in the few developing countries where it is located. However, this is a
small percentage of civil infrastructure construction projects built in developing countries where the
benefits to locals are not realised. Developing countries have received modern infrastructure that has been
designed and built to match the competencies and technology of developed countries. Their participation
in those projects is hampered by a lack of existing skills. Because such projects have a relatively short
duration, participating international companies have little opportunity for growth within local markets,
even if they initiate a development programme, as this would not have moved the locals beyond the
required steep and technically demanding learning curve. The participating international companies have
the ability to innovate and could develop well-structured skill transfer frameworks with predefined
criteria based on local resources to modify design and construction processes to be more in line with local
workforce competencies and technology. The socioeconomic needs of the locals can thus be reconciled
with the commercial needs of the projects, transforming lives through the creation of shared value.

This would gradually elevate and move the local construction industry along the learning curve, laying
the groundwork for more widespread and purposeful adoption of technological advances. We'd have a
16
better chance of maintaining our technological advantage and business longevity. All of this is common
sense, but the biggest challenge will be convincing the industry to act and think differently. Perhaps it is
time to abandon the old protectionist belief that transferring knowledge and technology means nurturing
future competitors.

17
 CONCLUSION

Today, India is brimming with new hope, energy, and excitement about the future. The decisive mandate
of the UP elections and other States has demonstrated the strong desire for faster development and
economic growth everywhere. These elections marked the end of traditional caste and communal politics.
To meet our people's hopes for a better and more fulfilling life, as well as our youth's hopes for
employment and a brighter future, rapid infrastructure development is critical. The outcomes must also
reach all segments of the population in every corner of the country.

The development of infrastructure is critical to India's increased success, growth, and competitiveness.
Even if financial constraints are met, timely completion of infrastructure projects is expected to remain
the most difficult challenge. Another issue that must be addressed is citizens' access to the facilities
provided by the projects. For example, while the power sector has improved over the years, power
distribution remains a significant challenge. In the parliament of 2021, the Indian government announced
a plan to invest 111 lakh crores (US$1.6 trillion) in India's infrastructure growth over the next five years.
This step was well received by the sector, as India, a nearly $2.6 trillion economy, experienced its first
recession as a result of the pandemic's social and economic distress. The current government's vision and
mission of infrastructure development through borrowing and lending in the short run and disinvestment
of public assets and privatisation in the long run has both advantages and disadvantages. However, it
would be interesting to note the outcome or consequences of these measures. Lastly, it is an axiomatic
observation that a weak infrastructure can create impediments in a country’s manufacturing and other
sectors’ competitiveness. There is an urgent need for effective coordination between federal and state
agencies, as well as the establishment of a vibrant single-window process for planning and
implementation, with milestones and timetables.

To conclude, our path in the quest to reach the top may be difficult but we are set on the right track, with
speed, confidence and determination. Now, as Swami Vivekanand had thundered-“Rise, awake and stop
not until the goal is reached”

18
 REFERENCES

1. PPP India, FAQs, https://www.pppinindia.gov.in/faqs

2. Closing the financial gap (Chua, Lee, and Chalmers, 2017)

3. A sourcebook for poverty reduction strategy, (Klugman., et., 2002)
4. Anup Kapadia, Role of Capital Market in Financing Infrastructure Projects,
https://www.primedatabase.com/Article/dir-99ar7.pdf (last visited on Oct 3, 2022)

5. Joel Rebello, NBFCs staring at a sharp rise in NPAs this fiscal: Crisil, Economic Times (Oct. 1, 2022),
https://economictimes.indiatimes.com/markets/stocks/news/nbfcs-staring-at-a-sharp-rise-in-npasthis-fiscal-
crisil/articleshow/80978874.cms?from=mdr

6. Shephali Kapoor, Impact of NBFC Crisis on Indian Real Estate, https://www.99acres.com/articles/impact-of-

nbfc-crisis-on-indian-real-estate.html (last visited Apr. 3, 2022) 7

19