Dear prime minister, you must be tired of
public letters addressed to you that espouse homilies about
what must be done for the country. Even so, I decided to
pick up courage to share a concern which have been bothering
me over the past few months. Please do forgive this
Your government will shortly complete a year
in office -- a year which has been quite satisfactory on the
economic front. Despite a less-than-average monsoon, India
may well end up with slightly over 7 percent GDP growth for
This is a creditable achievement in a milieu
of significantly hardened oil prices, and given that it
follows 8.5 percent growth in 2003-04. Industry is trotting
along quite nicely with almost 8 percent growth; services
continue to grow at above 8.5 percent; and notwithstanding
higher energy as well as raw material prices, companies will
post growth in profits for 2004-05. More significantly,
India is again catching the attention of the world, and for
all the right reasons.
Yet, as a pragmatic economist, you must be
thinking about the sustainability of economic growth, and
grappling with a key question: "What can India do to ensure
that it forever alters its growth trajectory from an average
of 6.1 percent that it achieved between 1992 and 2004 to 7
percent and then, perhaps, even 8 percent over the next
decade or so?"
The issue really reduces to just one word:
"infrastructure". No doubt, some sectors have done well.
Mobile telephony, is success story. Thanks to the private
sector-led triple-digit growth in mobile phones, our tele-density
has doubled from under 5 percent a few years ago to close to
10 percent today.
There are now almost 60 million mobile
subscribers, and the number of mobile phones outnumber land
lines. Yet, the fact remains that China had 344 million
mobile users and another 319 million fixed line subscribers
in February 2005, which translated to a tele-density of 25.9
percent for mobiles and another 24.9 percent for fixed lines
-- or 50.8 percent in all.
Many would also consider our highways
programme to be a success story. After all, 4,611 km of the
5,846 km which comprises the golden quadrilateral have been
completed, and another 1,235 km are under implementation.
However, it is also a fact that only 692 km
of the 7,300 km of the North-South-East-West corridor have
been completed, and there is a sense that the pace of
construction and awarding of contracts has slowed down since
elections were announced last year. If we compare ourselves
with ourselves, we may have done well.
But we only need to compare ourselves with
China to realise how much more we need to do. By 2004, China
already had over 25,000 km of modern multi-laned, tolled
highways, much of which was financed by FDI.
In ports, too, while there have been
improvements compared to a decade ago, we still have a long
way to go before being in the same league as Shanghai,
Tanjung, Johore, Penang or Colombo, leave aside Singapore.
For instance, while India handled less than 10 million
twenty-foot equivalent units (TEU) of container cargo, China
handled over 50 -- and the Chinese ports are not among the
best in class.
And notwithstanding much-needed reforms in
civil aviation, nothing really has happened regarding
airports. As far as railways go, it is determinedly moving
in only one direction -- downhill.
The power situation is too embarrassing to
speak of. One can keep on repeating the beneficial enabling
effects of The Electricity Act, 2003 and the unbundling of
SEBs, but there just isn't enough power generation,
transmission and distribution on the ground.
The fact that 60 percent of Indian
manufacturing entities need to have their captive power
generating units or gensets says it all. In China it is 16
percent; in Brazil 17 percent; and even in Pakistan it is 42
A recent study that I am doing for the World
Bank suggests that in order to maintain the Tenth and
Eleventh Plan targets, the investments needed in roads,
power, railways, ports, airports and telecom for the next
decade will be Rs 1,914,300 crore -- of which the central
government may at best be able to finance Rs 1,360,100 crore.
We don't need to closely debate the numbers.
Any which way, these are large enough. That brings me to my
basic point. We cannot sustain even 7 percent GDP growth
over the next five years without a big push in
infrastructure. And we won't be a cynosure of all eyes if
our average growth rate hovers at around 6.5 percent while
China's trots along at over 8.5 percent. Clearly, the thrust
has to be infrastructure.
Unfortunately, infrastructure is a very
disparate business, with each sector falling under different
-- often overlapping -- ministries. Neither is there
sufficient coordination, nor accountability in any real
Barring the numbers given in Plan documents,
there are no clear infrastructure plans, targets and defined
implementation schedules. Some ministries are better than
others, but that's not enough given the size of the task.
To give infrastructure the importance it
deserves, there has to be a signal that the ownership lies
at the highest level of government. Therefore, it would be
advisable for your office to have a dedicated infrastructure
secretariat reporting to you, which would not only monitor
the status of projects in different sectors but also convene
meetings once every two months between you and your
This secretariat could ensure consistency in
policies, quickly identify problems and refer them to
appropriate levels and, most importantly, regularly monitor
progress. It would go a long way to demonstrate your
government's focus on infrastructure. Properly executed, it
would prove that implementation is the key.
Mr N R Narayana Murthy often says: "Profits
are an opinion; cash in the bank is fact". Similarly,
"policies are words; infrastructure on the ground is fact".
You know this, and can make the change happen. Please do.