The Indian Economy Blog

August 3, 2006

Light At The End Of The Tunnel?

Filed under: Basic Questions,Business,Growth,Infrastructure — Prashant @ 1:12 pm

Is India finally improving its infrastructure?

Amidst all the hype regarding the Indian economy, the inevitable “Yes, India is doing well, but..” statement is most likely to peg India’s poor infrastructure as public enemy # 1.
For instance, Janet Yellen in a mostly optimistic essay, A Monetary Policymaker’s Passage to India says

In the view of most private and public sector representatives with whom we spoke, the number one barrier to sustainable growth at the recent accelerated pace in India is infrastructure, particularly transportation and power.

If you’re still not convinced how pivotal infrastructure (or lack, thereof) is to India’s development, go no further. Or check this mess.

My actual knowledge of India’s infrastructure is limited to anecdotal observations in just two cities, Chennai and Mumbai. However, suspect that most of what I’ve seen is true of other cities. For instance, comparing Chennai 2006 with Chennai 1996.

Telephones: tremendous progress, especially in cell phones.

Air travel: growth and lots more options. The airports have improved but that isn’t saying a whole lot. They’ve got a long way to go.

Power: Chennai was probably better off with respect to power compared to other Indian cities, back in 1996. In other words, it wasn’t as bad. Can’t see any significant difference, for good or bad. However, power for commercial and industrial use is expensive.

Roads: Chennai’s traffic is far worse today and I fear that it’s about to get even more horrendous. I’ve heard innumerable horror stories about Bangalore’s traffic jams. Looks like Bangaloreans will have someone else to commisserate with.

Ports, railways, inter-state road transport: Don’t know enough to comment.

However, T N Ninan thinks that there may be a glimmer of hope, yet.

... it is probably true that the worst phase of India’s infrastructure problem (communications, transport, power) is over. In the case of even the most intractable problem (power), the solutions are more or less in place and the results have begun to show.

Q) Do you think Ninan’s optimism is justified?


  1. My knowledge is anecdotal as well I know Delhi, or NCR as it should be properly called, and I see massive investments in expressways, the famous Metro, and the environment, all with palpable results. I do not see any tangible results in the area of power and water.

    However, there is an incredible amount of energy and resources being allocated to the infrastructure. So even with some frictional loss due to corruption and inefficiency, one would expect a huge improvement over the next decade.

    Comment by Sarat — August 4, 2006 @ 6:23 am

  2. Well his optimism canot be justified completely.
    Infrastucture means both physical as in roads, bridges etc and social like education, heath care, etc.
    There is no mention about the social infrastucture.
    Definitely, our physical infrastructure has been growing but the question is that, whether it is sustainable and what are the negative externalities they have brought about?
    India needs more of social infrastucture as more on india’s population(56% approx) is poor.

    Comment by Alex — August 4, 2006 @ 6:40 pm

  3. our infrastructure growth is not at par with the development. the politicians and contractors should be made accountable for the
    development projects. the process should be more transparent

    Comment by indian — August 4, 2006 @ 9:03 pm

  4. As Indian points out, the importance of transparency and quality can indeed not be understated.
    Not much use building roads if they’re gonna come apart in a few months, and a few downpours.

    Before setting out to slake our thirst for quantity, we should first spend greater energies on setting some minimum norms for transparency and quality.

    Comment by seven_times_six — August 5, 2006 @ 12:19 am

  5. I agree with indian too. We need to steo up our standards in ensuring greater transparency and quality. there should not be a trade-off between both these.

    Comment by Alex — August 5, 2006 @ 12:55 am

  6. indian points out (#3) that the politicians and contractors should be made accountable for the development projects. the process should be more transparent

    Most of the stuff I read seems to rave about China\’s infrastructure.

    Q) Something that\’s puzzled me for some time — what sort of system does China have, to ensure accountability and transparency? Especially since they\’re not a democracy…

    Comment by Prashant Kothari — August 5, 2006 @ 7:09 am

  7. For the past five years that I have lived outside India, I make at least one trip back each year to Delhi. In that time I have seen the city effectively transformed.

    The metro is operational, roads are wider and less congested, domestic air travel is cheaper (but airports are messier), and entire new cities and malls have sprouted in the satellite towns – Gurgaon & NOIDA.

    I still complain about much of this development, but largely because I view it from a western perspective – as things should be (I think traffic is chaotic, and airports are terrible). But in India you have to view things compared to how they used to be.

    So yes, there is cause for optimism. Of course, change will not happen fast enough to satisfy everyone :-)

    Comment by Dweep — August 5, 2006 @ 5:59 pm

  8. Q) Do you think Ninan’s optimism is justified?

    A) Yes. India and China are few of the economically stable nations that can sustain good living standards beyond the fossil fuel age. There is 6000 years of history to prove that.

    Comment by GeneralPublic — August 5, 2006 @ 8:27 pm

  9. Well, I think India has a long way to go when it comes to upgrading infrastructure. A few metros/pockets
    getting a better deal than before does not mean anything. There is little evidence there is any sort of planning and thinking going on behind the current govt thrust in infrastructure. Activity and accomplishment are different things.

    Comment by IndianJester — August 6, 2006 @ 12:55 pm

  10. Prashant,

    On the remainer of infrastructure here are some views-

    1. The way Railway reservations have been transformed is incredible- glitch free, transparent and hassle-free. The amenities at the stations although nowhere near what they should be, are improving dramatically with pvt. sector participation. On top of it all, with incresed mkt share in freighting, Indian Rlys actually returns a good surplus!

    2. Ports getting privatised has helped; but the congestion is still a mess. We are way behind investment in capacity.

    3. Inter-state transport is well, improving. Better roads and the Volvo buses are adding to the rail capacity.

    I am very hopeful despite all the issues. The way electronic voting has caught on, the way technology and rising income levels are driving progress, we will see definite progress. Yes, Iknow it seems so unbeleiveably bad as compared to the developed world; so much slower than China. Still, there is progress being made.

    Comment by little Ram — August 6, 2006 @ 9:29 pm

  11. I am not optimistic.Metro Cities do not make whole of India.
    ‘In the case of fiscal policy,government deficits are huge.Combined central and state fiscal deficits have been around 8 to 9 % of
    GDP in recent years.The fiscal situation has constrained public infrastructure investment and crowded out private investment.
    The deficits also undermines reforms in other areas,such as the financial sector,because the government is always concerned about
    finding buyers for the debt’
    Past,howsoever glorious,do no help.

    Comment by sun — August 7, 2006 @ 12:08 pm

  12. Mr Ninan is painting a rosier picture of reality. I am bullish on India but it helps to be realistic.

    Here is what I know anecdotally from exporters of manufactured goods from India.. (please verify these through your resources)

    The time taken for a container to load on a ship to US from the time it reaches the port?
    at Mumbai port : 2-3 weeks
    at Shanghai port : 48 hours!!
    ..and typically a container leaving for US from Mumbai has to be routed through S’pore or Dubai which adds a further 1 week delay.

    In the world of Just-In-Time manufacturing, this is absolutely unacceptable. The reasons: not right technology at ports, capacity, unionized labor, work practices, etc.

    When it came to shipping bits/bytes – the infrastructure (fiber/bandwidth) was to create – as it had no legacy and most of it was excess capacity created by global companies. For shipping atoms, the bottleneck TODAY is not internal roads (the worst case delay they can add to any shipment is 1 day) is the ports!!

    Legacy is the biggest impediment to change. I hope we invest more in modern ports in newer locations

    Comment by aj — August 7, 2006 @ 1:01 pm

  13. Yup, US is getting lots of shipping containers but has nothing to give back!!!!

    Shipping Containers Recycled as Homes

    Comment by GeneralPublic — August 7, 2006 @ 1:24 pm

  14. From a citizen’s point of view, I would think a lot of things have improved in Chennai – power, infrastructure,
    and the growth in those sectors are in good agreement with the overall economic growth/population/etc.
    Since my interests are in the fielf of power/energy, I would like to make a few comments
    1. We can never give an overall opinion, it is always region specific in a country as diverse as ours.
    2. South (Bangalore, Chennai, Mysore, etc) is doing considerably better than the North (Delhi, Gurgaon)
    as far as power infrastructure goes (I would love to give the numbers but time is a constraint on Monday noon!!).
    East has not grown much in terms of business growth more so because of the communist govt in Kolkata. Bombay is
    exploding but power infrastrucuture is better than the physical infrastructure (roads, drainage, etc).
    3. The overall quality of power is of concern even in the growth pockets, as not much is done in terms of
    regulation to prevent low quality power being fed from the distribution system.

    Have a lot more to share but I stop here. Please check for a few posts in this regard.
    4. The present government has a decent energy policy, with nuclear energy a key component to meet the long-term
    energy needs (something thats quite accepted by even developed nations like Britain). We are doing quite well on
    the renewable energy portfolio too (ranked #4 in wind in the world), but a lot more awareness has to be created
    about power saving technologies, and more schemes developed in the same.
    5. Rural electrification is also progressing in a phased manner..definitely, more homes are lit every other day!!
    6. A more rural focussed energy scheme has to be developed, using bio-mass, solar, etc. rather than bringing them
    into the demand equation for non-renewable energy.

    Comment by fullymubbed — August 7, 2006 @ 1:29 pm

  15. Dear Sun,
    I agrre with your views except in the fact that public investment crowds out private investment.
    It is a mistake to assume that public and private sectors are always in competition with each other, in the case of India.
    The reason is apparent- we have got losts of unutilised resources. Public investment, if allocated properly, will create more demand which further increases production in an economy.
    Actually in India public investment ‘crowds in’ private investment.

    Comment by Alex — August 7, 2006 @ 5:14 pm

  16. I think two things need to be added to the list above. One is the Internet infrastructure and other is water. Internet is going to be very important in increasing efficiency and in opening up to the world.

    Comment by MrRanger — August 9, 2006 @ 8:55 pm

  17. i think instances of investment in infrastructure are comparatively few and far in between.our extremely pressed fiscal situation just does not leave additional respources for massive invstment in infrastructure.also,the govt of the day appears more interested in initiating new projects rather than maintaining old ones.the smartest way out,which even the govt is realising,is the public pvt partnership model in investment

    Comment by amrita — August 23, 2006 @ 5:08 pm

  18. Hasn’t improved much at all in the last 20-30 years IMO.

    Comment by Atoms for Peace — February 21, 2007 @ 2:46 am

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