You are on page 1of 14

Jamia Millia Islamia University

Department of Economics
B.A (H) Economics IIIrd year

Presentation

Infrastructure Development
Need and Availability

By:
Group-III

 Jamaluddin Fayyaz
 Manouchiher Roshangar
 Ghulam Abbas Ehsani
 Sumit Wadhwa
 Abdul Samad Wani
1|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

Infrastructure Development Need and


Availability
 introduction and definition of infrastructure
 What is the need for infrastructure development?
 Availability of infrastructure in India
 Plans and Policies of Indian government toward the infrastructure development
 Conclusion

Introduction:
The term infrastructure has been used since 1927 to refer collectively to the roads, bridges, rail lines,
and similar public works that are required for an industrial economy to function. This term has also
been used for the permanent military installations necessary for the defense of a country.

Infrastructure typically refers to the technical structures that support a society, such as roads, water
supply, wastewater, power grids, flood management systems, communications (internet, phone
lines, broadcasting), and so forth.

Economically, infrastructure could be seen to be the structural elements of an economy which allow
for production of goods and services without themselves being part of the production process, e.g.
roads allow the transport of raw materials and finished products.

According to Romer’s model (1987), Infrastructure is a cost reducing technology (Paul Michael
Romer is an economist and professor at Stanford University. He is considered as an expert on
economic growth). According to him infrastructure can promote specialization and long-run growth.
The Romer’s model predicted that the degree of specialization is directly or positively correlated with
the core infrastructure.

An asset can be considered to be part of the infrastructure when it is an integral part of a total
system, i.e. if the asset is removed the system is incomplete, or the particular asset is necessary for
the system to deliver the required standard of service.

Infrastructure assets generally have the following attributes:

 They are large networks constructed over generations which are not often replaced as a
whole system
 The system or network has a long and indefinite life because its service capacity is
maintained in perpetuity (by continual refurbishment or replacement of components as they
wear out).
 The system components are interdependent and not usually capable of subdivision or
separate disposal, and consequently are not readily disposable within the commercial
marketplace.
2|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

 The system interdependency may limit a component life to a lesser period than the expected
life of the component itself.
 The assets have a high initial cost and a value which is difficult to determine.

A region cannot be so easily termed having ‘inadequate’ infrastructure. There are various facets of
infrastructure services availability and a region, while lacking in one or more, may possess adequate
supply of others. Consequently Infrastructure can be subdivided into constituent components.
Infrastructure is composed of 3 broad areas as follow:

I. Physical Infrastructure;
II. Financial Infrastructure; and
III. Social Infrastructure.

Further subdivided, the following components of Infrastructure are identified:-


a) Agro-specific Infrastructure - consisting of irrigation infrastructure and agricultural credit;
b) Transport & Communication Infrastructure - consisting mainly of Roads and Railways;
c) Power Infrastructure;
d) Financial Infrastructure - consisting mainly of Banking Services;
e) Education infrastructure; and
f) Health infrastructure.
(a), (b) & (c) constitute Physical Infrastructure, and, (e) & (f) constitute Social Infrastructure.

Infrastructure

Physical Infrastructure Financial Infrastructure Social Infrastructure.

Agro-specific Infrastructure Banking Services Education infrastructure

Health infrastructure
Transport Infrastructure Life insurance corporations

Communication Infrastructure

Power Infrastructure

The physical infrastructure covering transportation, power and communication; social infrastructure
including water supply, sanitation, sewage disposal, education and health, which are in the nature of
primary services and financial infrastructure has a direct impact on the quality of life. The visible
signs of shortfall in capacity and inefficiencies include increasingly congested roads, power failures,
long-waiting lists for installation of telephones and shortages of drinking water illustrate gap
between demand and supply of infrastructure and also raises questions concerning the sustainability
of economic growth in future.
A high transaction costs arising from inadequate and inefficient infrastructure can prevent the
economy for realizing its full growth potential. Thus, infrastructure is very important in sustaining the
3|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

economic development.

Need for the Infrastructure Development:


Social infrastructure deals with the provisioning of drinking water and sanitation,
education, and health which defines the quality of life of citizens. These services affect day-to-day life
of people and have long-term impact in terms of longevity and earning capacity.
Development of social infrastructure comprising education, health and medical care, nutrition,
housing and water supply which is instrumental in contributing to substantial improvements in
human resources development which, in turn, initiate and accelerate economic development with
increased Telesis. Physical quality of life and human well being are pivotal on the enhanced
availability of these social services. These services are key to overall increased productivity.
Investment in human development programme, enable the poor to help themselves and try to give a
fair chance of getting those rewards.

Talking about operations Management (Operations management is an area of business


that is concerned with the production of goods and services, and involves the responsibility of
ensuring that business operations are efficient and effective. It is the management of resources, the
distribution of goods and services to customers, and the analysis of queue systems) which has 3
major aspects namely;
 Quality
 Cost and
 Time
That is to produce and deliver product and services at the right time with the right quality and right
cost. These objectives can only be achieved when all the players involved from extraction to
consumption work in a synchronized way. Infrastructure plays a major role in order to obtain these
objectives. These can be achieved by following:

 Traffic management at the ports (Capacity Management), i.e., maximum utilization of the
ports
 Modernization of the airports (in India) and Scheduling of the air planes at the airports
 Good environmental management practices through recycling, waste management
Inventory or logistics management to better utilize the transportation facilities
 Maximum utilization of the resources (Manufacturing machines) through a continuous and
regulated supply of electricity
4|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

The above figure shows the influence of various infrastructural factors on operations of an
organization or a project. We see the input and output is shown in the figure. So what should be the
inputs or requirements which in turn would give us the output at the right time with a high quality
and a low cost of production. The infrastructures required by people are: Sanitation, Water Supply,
Electricity Supply and Environmental Safety. In the same way the infrastructure required for
information are; telecommunication and IT Infrastructure. Infrastructure required in supply chain
management are; Aviation, Ports, Roads and Railways and Plants and machinery. If the above
mentioned requirements are fulfilled then the output achieved would be delivered at right time with
high quality and low cost. In the same way the customer Satisfaction would be high and we would be
able to deal with environmental management problems which are a very serious problem in this
modern age that includes Waste minimization, Reverse logistics (Reverse logistics stands for all
operations related to the reuse of products and materials) and Recycling. The output of the well
managed operations creates better services and products which are the assets of any country.
Manufacturing of the products adds value to the Nation's economy and delivering of high quality
service raises the standard of living of the country contributing to its development.

Therefore “Economic development is a consequence of infrastructural development”. For instance,


development of agriculture depends, to a considerable extent, on adequate expansion and
development of irrigation facilities. Industrial progress depends on the development of power and
electricity generation, transport, and communications. Obviously if proper attention is not paid to the
development of infrastructure, it is likely to act as a major constraint on the economic development
process in the country.
5|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

A revisit
Along with Independence, India inherited famine and poverty from its colonial rulers. There was dire
need for housing, health facilities, education, roads, power, irrigation projects and drinking water
facilities for millions of underprivileged people. This called for proper economic planning.
Unfortunately, the task of planning fell into the hands of those who were sympathetic to the feudal
lobbies. These rich and powerful people had less concern for the social uplift of the poverty stricken
masses. The outcome was that they lost sight of the main objective of planning the economy by
keeping the overall national interest in view. It created economic inequalities among the States and
erected roadblocks on the path of building infrastructure. Even today the people in power tend to fall
victims to this skewed vision.

The rural/urban scenario


It is 61 years after Independence. Today, the rural population accounts for nearly 68-70 per cent of
the total population and nearly half of them still live in poverty and illiteracy.

How good is the rural infrastructure?

The latest report of the National Sample Survey Organization on village facilities is a revelation in
itself. To quote from the report, “One fourth of our villages do not have electricity; only 18 per cent of
them get tap water; 54 per cent of them are more than 5 km away from the nearest health centre;
one third of them do not have pre-primary schools and 78 per cent do not have post offices”!

Yes, “India still lives in its villages”.

India's economic growth and development is predicated to a large extent upon the development of
its 700-million strong rural population. Majority of the population lives in about 600,000 small
villages and are engaged primarily in agriculture, directly or indirectly. A substantial portion of India's
current agricultural labor force has to move to non-agriculture sectors for incomes in all sectors to go
up. The challenge is to manage the transition of 80% of the rural population from a village-centric
agricultural-based economy to a industry based economy.

Grey areas of India Rural Infrastructure -

 A set of basic facts define the constraints within which the economic growth and
development of India's rural population must be addressed. Fundamentally, they relate to
resource constraints, the nature of infrastructure, and the future trajectory of the
geographical distribution of the population.
 These services includes, at a minimum market access, educational, health, financial,
entertainment, transportation, and communications. Further, services depend on the
availability of infrastructure.
 Infrastructure investment is irregular and inadequate to support 600,000 villages and the
average cost of providing infrastructure is inversely related to the scale of the operation.
 Limitations on the financial and other resources available for providing infrastructure made it
impossible to provide infrastructure at every village in India. Even if they were provided at
every village, it will not be commercially sustainable.
 The basic geographical structure of population distribution will change once India shifts from
being agriculture based country to industry based nation.
6|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

The Government has launched “Bharat Nirman" for the development of rural infrastructure. Plans
proposed for the development of India Rural Infrastructure are -

 Irrigation,
 Roads,
 Housing,
 Water Supply,
 Electrification,
 Telecommunication Connectivity.

The task ahead for the development of India Rural Infrastructure are :
 To connect 66,800 habitations with population over 1000 with all weather roads.
 To construct 1, 46,000Km of new rural roads.
 To upgrade and modernize 1, 94,000Km of existing rural roads.
 Total investment of Rs. 1,74,000 crore envisaged under "Bharat Nirman", investment on rural
roads estimated to be at Rs. 48,000 crore.
 To provide corpus of Rs. 8000 crore to Rural Infrastructure Development Fund (RIDF).

The cities shelter around 30 per cent of the population who contribute to the economic growth.
However, the most vital part of economic growth, which is infrastructure, hardly matched the
demands of even this 30 per cent of urban dwellers, spreading chaos at the slightest provocation
with the danger of turning the clock backwards. This mismatch has been seen in the Mumbai deluge
in September 2005 and a little later in Bangalore, shattering the “Shanghai dreams” that so many
harbor.

India being the seventh-largest country in the world has maintained an infrastructure management
that has enabled India to reach new heights.

Indian infrastructure report suggests a fairly good state of infrastructure planning in India. The
infrastructure building and engineering in certain spheres like power, telecommunications,
information technology, transport etc. needs more infrastructure resource solutions.

Indian infrastructure companies manage the infrastructure requirement in these areas. The
infrastructure companies in India also look after the infrastructure construction and development.
India also has many infrastructure finance companies that provide funding and financing for
infrastructure development projects in India. One of them is Infrastructure Development Finance
Corporation or the India Infrastructure Finance Company Limited.

Coming to infrastructure management services, these include services from:

 Infrastructure Architect - He helps in designing the basic blocks of infrastructure utilities


 Infrastructure Analyst - His job is to analyze the infrastructure business works in India.
 Infrastructure Advisory - He advises about the infrastructure solutions to a particular
problem and also evaluates and reports the risk involved in any particular infrastructure
development.
 Infrastructure Bank - It provides the infrastructure finance and asset management for
infrastructure assets in India.
7|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

The Indian infrastructure sector involves prolonged infrastructure research for the infrastructure
technologies to be updated. For the infrastructure optimization and reaching a level of a
standardized infrastructure outsourcing the bottlenecks in the system need to be smoothened. The
infrastructure requirements list the need for technology designed for the infrastructure today. These
are being provided through coordination among the developed countries like USA, UK etc. and the
Government of India.

The Chinese tales


The Chinese success stories are told and retold by many. Can India set her standards by looking at
China? Can one draw a parallel between those mega cities with the Indian ones, or its infrastructure
development for that matter? It is debatable. However, what can be compared is the Chinese
commitment. Look at their endeavours in making the Expressways. According to a recent newspaper
report, when India completed 6000 km of her Expressways in six years, China had done 40,000 km
within that time. Even today the Indian government endlessly debates the privatisation of airports. At
least some of the analysts perceive a ‘damaging drag’ on the economy due to problems connected to
infrastructure. Growth potential is dependent on the quality of performance of infrastructure to a
great extent - a fact the Chinese realised much earlier than us.

Infrastructure Spending
Infrastructure has continued to be one of the most important issues gaining the attention of
policymakers over the past two years. The Planning Commission of India, which is becoming a
powerful institution for key economic policy decisions, appears to be determined to push public
infrastructure investment. There seems to be a consensus among policymakers that the issue of
infrastructure needs immediate attention. After several years of hiatus, infrastructure investment is
witnessing a pickup - albeit at a gradual pace. A set of measures is being introduced by the
government for different sectors to accelerate infrastructure spending growth. It is expected
infrastructure investment to pick up to US$47 billion (4.7% of GDP) by F2009 from US$24 billion 3.5%
of GDP) currently. Although this is a relatively moderate pick-up, it should provide some push to the
overall investment cycle, including the manufacturing sector.

India's Infrastructure Spending Is One-Seventh of China. We believe that the single most important
macro constraint on the Indian economy, holding back its average growth, is the low spending on
infrastructure. India is currently spending a miniscule amount compared with its needs, according to
our estimates. Our analysis indicates that China is spending seven times as much as India on
infrastructure (excluding real estate) in absolute terms. In 2003, total capital spending on electricity,
roads, airports, seaports and telecom was US$150 billion in China (10.6% of GDP) compared with
US$21 billion in India (3.5% of GDP). It is believed that there is a need for a national plan to increase
infrastructure spending gradually to US$100 billion p.a. (8% of GDP) by 2010, from an estimated
US$24 billion (3.5% of GDP) in 2004, to push India on to a sustained growth path of 8-9%.

Public Expenditure:
Recognizing the importance of social capital the Government has placed social services as the centre
stage of the development strategy. Social sector expenditure enhanced to Rs.972178.99 Lakhs in
8|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

2004-05 works out to 33.83 per cent of the total budgetary expenditure of over Rs.859776.91 Lakhs
in 2003-04, showing an increase of 13.07 per cent. Among the social sector 47 per cent of the total
allocation goes in favour of education followed by health sector (21%), water supply (2%) and
housing (1.0%). This indicates the seriousness of the Governments' commitment to promotion of
social infrastructure, which is the greatest resource in the growth process.

Public Expenditure on Social Sector (Rs. in lakhs)


Year Education Health Water Housing Others Total Social Total Budgetary
Supply Sector Expenditure
1999-00 434871.82 166536.52 26108.15 2266.99 134599.59 764383.07 2072783.12
2000-01 439599.87 170852.57 18069.85 2639.11 148059.44 779220.84 2175244.26
2001-02 429286.88 164743.42 16292.43 2844.60 154538.32 767705.65 2155697.25
2002-03 414532.71 171551.03 21630.10 6173.06 183517.63 797404.53 2568769.74
2003-04 417506.11 188193.92 25284.19 12128.52 216664.17 859776.91 2527095.13
2004-05 455619.78 203554.56 20179.79 9998.03 282828.83 972178.99 2873678.99
Source: Budgetary Documents of various years.

India is passing through the phase of population explosion. According to the theory of demographic
transition India is experiencing the second stage of demographic transition from past half decade.
The population of India as on 1900 was 23.83 Crores and it was increasing at an average rate of 1.96.

In August of 1999 India became the second country to have its population reach the one billion. The
increase in population to such an extent was as a consequence of the increase in the birth rate. In the
year 2004-05 it reached 1.087billion from one billion in 1999. Thus, the population during the period
1999-2005 has increased by 8.7 per cent. The public expenditure on education as recorded in 1999-00
was 434871.82 while it is increased to 455619.78 in 2004-05. Thus the public expenditure on
education has increased by 4.77 per cent. Therefore we can clearly conclude that there was a gap
between the available infrastructure development and the need for it.

Private investment infrastructure:


The government of India has increasing realized that infrastructure need not be a public
sector monopoly. In the past, the responsibility for providing infrastructure services was
vested with the government-the reason being: heavy capital investment, long gestation
periods, externalities, high risks and low rates of return on investment. The infrastructure
under government ownership has however proved thoroughly inefficient and corrupt. The
demand for infrastructure facilities and services has always outpaced supply; besides the
quality of existing supply is very poor. The consequent of shortfall in the capacity and
inefficiencies in infrastructure facilities are patent in the increasingly congested roads,
chronic transport, bottleneck, frequent power failure and load shedding, long waiting lists
for installation of telephones and shortage of drinking water. The widening gap between
demand and supply of infrastructure and the extremely poor quality of the existing supply
raises important questions concerning the sustainability of economic growth of the country
in the coming years.

In order to sustain an annual GDP growth rate of 8-9 per cent, it is imperative to accelerate
the rate of investment in infrastructure. According to finance ministry expert group on
commercialization of infrastructure projects (June 1996) the total infrastructure investment
was required to be about US$ 88 billion to US$ 99 billion during 1996-2001 and another US$
9|I n fr as tr u ctu re devel o pme nt nee d a nd avail abili ty

165 billion during 10th planning period (2001-06).

And now, according to the GOI the country needs US$ 320 billion (at 2005–6 prices) in
infrastructure spending over the next five years (2007-12). Like the previous planning period
this massive investment is clearly beyond the capacity of the government. Since the financial
resource available to government are very limited and recently the government of India is
passing through the challenging era, close to half of US$ 320 billion will need to come from
the private sector to maintain the current growth rate and to bring millions of Indians out of
poverty.

Government investment and private investment move in opposite directions. For example,
during the 1969-1987 period, when government investment is growing private investment is
stagnant, shown in following Figure given below. Meanwhile, during the period of 1987-
2005, government investment remains relatively stable, allowing private investment to
grow. Given these graphs, it appears likely that crowding out has played a major role in the
Indian economy.
10 | I n f r a s t r u c t u r e d e v e l o p m e n t n e e d a n d a v a i l a b i l i t y

What will be the future role of public sector enterprises in the field of infrastructure, after
the entry of private sector?

The public sector enterprises will continue to shoulder the major burden of providing critical
infrastructure services but public sector reforms would be necessary to broad-base their
management, to upgrade their technology, to improve their performance and quality of
services and generate adequate investable resources through rationalization of service
charges and better recovery of costs.

Infrastructure Is Key for Job Creation


India's strengths of a huge skilled and semi-skilled work force, entrepreneurial expertise and
natural resources are currently being inadequately utilized because of lack of
infrastructure. According to UN estimates, the working-age population (15-64 years of age)
in India will increase by 71 million to 762 million in 2010. India is set to be the largest
contributor to the additional working-age population globally over the next five years,
accounting for 23% of the worldwide increase, according to UN estimates.

India already has an unemployed population of 36 million, based on official estimates (we
think actual unemployment could be double this). India is undergoing a transition, in which
the working-age population is likely to keep rising faster than the non-working-age
population
(i.e. its age dependency ratio should improve further). With improving dependency, India
will have the opportunity to create a virtuous cycle of more productive job opportunities,
greater savings, increased investment and higher GDP growth. However, this will require
the implementation of a well-thought-out macro - as well as micro - strategy by the
government.

Infrastructure is, in many ways, the key to unlocking underutilized manpower. Efficient and
low-cost infrastructure is the key facilitator of globalization and labor arbitrage. India has
been able to make big inroads in software services and business process outsourcing due to
the availability of high-quality telecom facilities, the infrastructure backbone for IT and ITES,
at a reasonable cost.

However, the manufacturing sector is constrained by relatively inefficient and high-cost


infrastructure - namely roads, railways, airports, seaports and electricity. It is believed that
the lack of adequate infrastructure is becoming a constraint on inter-state as well
as global trade. This is evident in India's share of global goods exports, at just 0.8% in 2004,
compared with China's 6.5%. With the exception of a select few, Indian companies that
have globally competitive cost structures are not able to scale up their operations.
Low government spending on infrastructure hurts high-employment-generating, labour-
intensive small enterprises the most.

While large companies can draw on their own resources for basic infrastructure services,
11 | I n f r a s t r u c t u r e d e v e l o p m e n t n e e d a n d a v a i l a b i l i t y

such as a captive electricity plant or a diesel generator set, small enterprises suffer when
public infrastructure support is lacking. In many cases, it is not cost per se but the sheer lack
of infrastructure that holds back small enterprises. In addition to attracting domestic
investors for aggressive capex, improved infrastructure should also pull in foreign
direct investment in manufacturing and augment a sustainable recovery in the investment
cycle and growth.

Growth Potential
According to the consultation paper circulated by the planning commission, a massive US$
494 billion of investment is proposed for the eleventh plan period (2007-12), which would
increase the share of infrastructure investment to 9 per cent of GDP from 5 per cent in 2006-
07. This translates roughly into US$ 40 billion annual additional investment.

The projected sector-wise shares are: 30.4 per cent in electricity, 15.4 per cent in roads and
bridges, 13.7 percent in telecommunications and 12.4 per cent in railways among others.
Significantly, 30 per cent of the total investment is expected to come from the private sector
(including public-private partnership). Indian officials have invited foreign entrepreneurs to
invest in the sector which would require investments worth US$ 500 billion to sustain India's
fast-growing economy.

For this, the government has already enacted many proactive measures like opening up a
number of infrastructure sectors to private players, permitting FDI into various sectors,
introducing model concession agreements, taking up new projects like the National Highway
Development Project, National Maritime Development Programme among others. Some of
the projects planned for the next five years include:

 The government is planning a 40,000-MW hydro power generation capacity during


the 12th (2012-17) and 13th (2017-22) Plans.
 Additional power generation capacity of about 70,000 MW
 Constructing Dedicated Freight Corridors between Mumbai-Delhi and Ludhiana-
Kolkata
 Capacity addition of 485 million MT in Major Ports, 345 million MT in Minor Ports
 Modernisation and redevelopment of 21 railway stations
 Developing 16 million hectares through major, medium and minor irrigation works
 Modernisation and redevelopment of 4 metro and 35 non-metro airports
 Six-laning 6,500 km of Golden Quadrilateral and selected National Highways
 Constructing 1,65,244 km of new rural roads, and renewing and upgrading existing
1,92,464 km covering 78,304 rural habitations
12 | I n f r a s t r u c t u r e d e v e l o p m e n t n e e d a n d a v a i l a b i l i t y

Conclusion
It is believed that India is on the right track. And they are confident that the public and
private sectors, working in partnership and in collaboration with development agencies, will
be able to bring about significant and sustainable improvements in India’s infrastructure,
which will also help the overall process of growth.

But the country needed double-digit growth in manufacturing and services sectors in the
next five years, and had to double farm output, if it was to meet the target. The Indian
economy has grown at an average eight per cent in the past three years, and a 10 per cent
annual GDP growth is difficult to achieve unless the country improves its infrastructure.

According to the prime minister Mr. Manmohan Singh “Infrastructure development is a


major constraint on the industrial growth in India. India is aiming to achieve 10-per cent
annual GDP growth by the year 2011-12, but the country needed over $300 billion to
upgrade its infrastructure over the next five years”

Some believes that a key reason for India not being able to even sustain its growth rate of 8-
9% is slow growth in infrastructure spending. They think the biggest hurdle to a vigorous
capex cycle in the private sector is the lack of support from physical infrastructure. Although
we are finally seeing a pickup in infrastructure spend as a percentage of GDP (to 4.7% of
GDP in F2009 from 3.5% of GDP as of F2005), the pace needs to rise more sharply. They
believe that, for GDP growth to accelerate to over 9% on a sustainable basis, infrastructure
spending needs to rise to US$100 billion (around 8% of GDP) by 2010. In turn, to boost this
spending, the government needs to improve the infrastructure investment environment to
ensure greater participation by the private sector, raise public resources by initiating
privatization of public sector companies and reduce the revenue deficit.

Infrastructure Report Summary (2008)


The Indian construction industry comprises close to 300,000 players, employing a total
workforce in the region of 30mn. Driven by strong demand from the transportation, power,
urban infrastructure and irrigation segments, the industry contributed nearly 8.25% to India's
gross domestic product (GDP) in 2006. This report forecasts the Indian construction industry
to be valued at US$85.81bn in 2008 and at US$167.14bn by 2012.

In the past few years, the Indian government's focus has been directed towards improvement
of road and housing infrastructure. Also, development of airports in accordance with
international standards has taken off in a big way, with a slew of projects across India. Some
of the major projects being undertaken here include the large-scale greenfield development of
airports in Bangalore, Delhi, Hyderabad and other cities at a combined worth of over
US$35bn.The Indian government is set to invest about US$150bn over the next five to six
years for the development of infrastructure, of which US$60bn will be poured into building
roads across the country. It has also taken initiatives to strengthen capital inflows by allowing
100% foreign-equity participation in the construction industry. But to forestall speculation in
real estate by foreign investors, the sale of undeveloped land has been prohibited.

India has a skilled workforce, but its business environment is crippled by excessive
government interference. Foreign investment remains restricted in many sectors, with greater
13 | I n f r a s t r u c t u r e d e v e l o p m e n t n e e d a n d a v a i l a b i l i t y

liberalisation opposed by the Left. Hiring and firing procedures are governed by rigid labour
laws under which companies employing more than 100 people need the permission of the
state chief minister to lay off staff. Other concerns include the 670 or so industries reserved
for small-scale producers, high import-tariffs levied on foreign-made goods, failing
infrastructure, especially poor power supplies, and a warped bureaucracy needed to approve
'permits' for even the most routine tasks. But India is fast-tracking the creation of South East
Asian-style SEZs, aimed at overcoming some of these bottlenecks.

Although many international contracting groups do have a presence in India, the market has
been difficult to penetrate, with high tariffs for imported building materials and a complex
and bureaucratic system of government. There are 27 separate states in the country, all of
them having their own specific regulations and codes. However, the government now allows
majority foreign-ownership for joint ventures and actively encourages joint ventures with
foreign contractors on major infrastructure projects, as there is a shortage of local firms with
sufficient funds to handle such activity.

Reference:
http://www.en.wikipedia.org
http://www.indiahousing.com
http://www.tn.gov.in
http://www.cmie.com
http:// www.rbi.org.in
http://www.oecd.org