Hand in hand
India must follow an agenda of balanced growth and infrastructure as a means of achieving sustainable development for the entirety of its population
Unbalanced growth is characteristic of most of the developing economies and their infrastructure sectors reflect it beyond doubt. Revisiting the infrastructure sector is essential in the interest of sustainable economic development. Physical infrastructure i.e., power, railways, roads, ports, airports etc; and social infrastructure i.e., education, health are two pillars which support the superstructure of the economy. Apart from financial constraints, sectoral imbalances are major challenges.
In the power sector, the gap between demand and supply is unending affecting not only industrial production but also agriculture. Similarly, despite phenomenal progress through schemes such as PMGSY and quadrilateral highway project, the inadequacy of road connectivity is a perpetual problem. It is settled that infrastructure needs cannot be fulfilled by government budgets alone and PPP is unavoidable. National Infrastructure Pipeline (NIP) launched by GOI in 2019, aims to spend Rs 102 lakh crores by 2024-25, with the Centre and states sharing the costs equally at 39 per cent each while the remaining 22 per cent will be by the private sector. But the corporate sector prefers power and telecom to roads and highways because of high profits and low risk. There are more than 50 power projects worth more than USD 10 billion in private hands today. Roads, therefore, are taken up through PPP Models as they entail expenditures beyond budgetary limits of states. Even for private parties in PPP projects finance is a problem. Credit market needs to be strengthened by efficient mobilisation of universal banks, investment banks and non-banking financial institutions; insurance companies, private equity firms, microfinance institutions, mutual funds, etc., too can be roped in. But it's a double-edged sword as the asset-liability mismatch syndrome always looms large on financial institutions which are already grappling with huge NPAs in lakhs of crores of rupees. Improving the performance of PPP is no lesser a concern either. Selection of viable projects, capacity building with professionalism, clarity in respective spheres of operation and effective regulatory mechanisms can make a substantial difference.
The skewed growth of infrastructure in India is manifested by the fact that it is largely identified with urbanisation as is concentrated mostly around cities neglecting the vast countryside and the rural economy. This is primarily due to a natural relationship between industrialisation and urbanisation; after all, cities are centres of excellence. This, however, has resulted not only in unbalanced growth but also rural-urban divide which affects supply chain and aggregate demand in the long run. The discrimination is geographical as well as demographic since the fruits of growth allude the masses. Even today in the first quarter of the 21st century, there are not less than a quarter of the total number of villages in the entire country that are cut off for about three months during monsoons where even the existing social infrastructure viz., health facilities, educational institutions, even PDS shops remain out of the reach of the people. Floods and cyclones make matters even worse. Road connectivity is still an issue in spite of numerous link roads constructed under various rural development schemes and NREGA.
Agriculture infrastructure, conspicuously, is a grossly neglected area if poor backward linkages, increasing cost of cultivation and, unending migration to cities, are any proof. The rural economy demands infrastructure by way of storage facilities, approach roads to PACS and for shipping inputs like seeds and fertilisers, adequate veterinary clinics and availability of farm machinery like tillers, seed drills, rotavators, cultivators, etc. in order to make farming more a commercial venture than an occupation for subsistence. In mechanisation, a major input in agriculture, India with 40 per cent is much behind China (59.5 per cent) and Brazil (75 per cent). It's heartening that the Central Government in August 2020 made a provision for agricultural infrastructure fund (AIF) to a tune of one lakh crore rupees for the first time in history. PPPs need to be explored and encouraged if the Government wants to make sure that the newly introduced three Farm bills deliver the intended results.
Importance of balanced growth cannot be more evident if our experience with the services sector during the last year of the pandemic serves as evidence. Vast and expensive infrastructure in sectors such as hospitality, aviation, financial services, tourism etc., remained unutilised for almost the whole year resulting in severe losses to business and employment. The revival takes a long time. On the contrary, had the rural economy, which is least affected by the pandemic, been blessed with such infrastructure it could have offset the losses occurred elsewhere in the economy with increased production in food grains, horticultural crops, livestock, and fisheries.
Social infrastructure is not hunky-dory either especially in health and education where much is left to be desired. It is unthinkable that an economy can grow without healthy and productive manpower. Physical infrastructure in terms of ports, airports, high tech cities is good, but it would need trained manpower which can only be possible by social infrastructure. The National Skill Development Mission document admits that only 3.2 per cent of 'educated workforce' is skilled, compared to figures as high as 96 per cent in South Korea. Though there is no dearth of opportunities in skill-based areas such as tourism, hospitality, retail marketing, medical care, infrastructure for vocational education is pathetically negligible vis a vis formal education. Private sector lacks the same enthusiasm in creating the infrastructure for vocational education and placements that it has in professional and higher education. Because firstly the target groups in the former are from poorer classes and secondly the ventures cannot be cost-effective. The best available infrastructure in both education and health is in the private sector but unfortunately out of reach of common people. Best medical facilities exist in urban areas but poor people can barely access them. Patients in emergencies are still carried by villagers to the nearest health centre manually, walking miles. No wonder the share of health expenditure is not even two per cent of the GDP making it more attractive for the private sector to invest as it is rewarding with minimum risk and maximum profit. Basic health services or even the presence of a qualified doctor within a two-kilometre radius is a luxury for most villages let alone super speciality services. Inadequate social infrastructure doesn't augur well for the overall health of an economy as it impedes better utilisation of human resources and physical infrastructure, and socio-economic inequalities continue to impair growth and development.
We must also not forget that political agenda influences economic agenda too. However, while political 'interventions' are positive and galvanise the system to rise to the occasion, political 'interference' exactly is the undoing of it. Extraneous considerations begin to operate creating unproductive and untimely assets in the name of infrastructure draining out precious public resources; a subject for some other day.
To sum up, infrastructure needs mobilisation of finances on one hand and sectoral balance on the other. Development of infrastructure cannot be unidirectional in terms of production and markets alone; it has to include areas closely linked and are essential for the overall economy. An agrarian economy where the majority of the Indian population resides needs a commensurate amount of infrastructure. Alongside physical infrastructure focus on social infrastructure is equally important to ward off classist bias to development. Needless to say that equity and inclusion must have their due importance in vision and roadmap. Growth and development are not for creating more billionaires, not an unpleasant side effect though, but to facilitate millions to cross the poverty line.
The writer is a former Additional Chief Secretary of Chhattisgarh. Views expressed are personal