Troubled road ahead

India’s infrastructure woes are well-documented. Various numbers are bandied about with respect to how many percentage points of economic growth are lost each year as a result insufficient and poor quality infrastructure. Suffice it to say that the country’s economy would be growing substantially faster if India had workable infrastructure. It doesn’t.  

But at least it is trying.  

Despite big challenges such as a weak rupee, withdrawal of large sums of foreign institutional investor money, difficult issues relating to land acquisition and a scarcity of capital, there has been near unwavering commitment on the part of the government to remove infrastructure bottlenecks. These challenges are compounded with issues such as the safety of women, corruption and police brutality now having found a place in the public conscience; but the government has at least carried on steadfastly in its pursuit of providing better infrastructure. 

In its XIIth Five Year Plan, India aspires to spend $1 trillion on infrastructure development, and expects about half of it to come from the private sector. Unlike in other aspects of administration, the government is actually proving to be a catalyst for greater private sector participation in the infrastructure sector in India. The use of different kinds of financial instruments is being encouraged in a bid to bridge infrastructure funding gaps. Infrastructure debt funds, for instance, will now be encouraged and the government will allow tax-free bonds up to INR50,000 crore in 2013-14. Additionally, in what can provide a major fillip to infrastructure investment, the Indian government has announced the building of two new industrial corridors between Bangalore and Chennai and between Bangalore and Mumbai.  

That the efforts of the government are paying dividends are evident when one looks at India’s new airports and the vastly improved transport infrastructure in many of its cities, including Tier II ones. The highway networks are significantly better than what they were a decade ago too and India has made substantial progress in connecting its far-flung rural areas with the rest of the country.  

While it is true that infrastructure in India has developed rapidly in pockets, there are several such pockets today. The improvement in infrastructure just south of the border in the Indian state of Bihar is striking. Bihar’s progress should be an eye opener for the Nepalese government, but it will not be.  

Their immense differences notwithstanding, there are things Nepal can learn from how India is going about the task of building new infrastructure. The first step is to have a modicum of humility and to admit there is a problem, something Nepalese politicians have always been unwilling to do.  

Such intangibles aside, the government must decentralise infrastructure development, as has happened in India to a large extent. Today, spending is centralised and while government revenues flow into Kathmandu, key towns such as Biratnagar – which provide much of this revenue – have seen virtually no improvement in infrastructure for the last two decades.  

It is imperative for the government to look beyond Kathmandu, and one way of doing this is to grant district-level administrations greater authority over the management of funds and infrastructure provision. Allowing districts to make their own decisions and permitting them to raise money independently from the private sector should be the way forward.  

With the introduction of a federal structure likely whenever the new constitution comes into effect, this could change, but that would depend on how powers are split between the centre and the states. With Nepal’s infrastructure deficit as it stands today, federalism cannot be based on the premise of political inclusion and representation alone.

(This was a column printed in the Himalayan Times on 10 March 2013)