Row over the Indian government’s economic programme
The government’s detail economic programme is supposed to attract foreign investment and is designed to restore the country to 9 per cent economic growth and create 12 million new jobs per year. In order to achieve such a goal, the programme is expected to increase investment in infrastructure to more than 9 per cent of GDP by 2014.
India’s Union Road Transport and Highways Minister Kamal Nath left for Zurich this week to attract foreign investors to local road building projects. Bidding is expected to start soon on 139 projects covering 14,395 kilometres at a cost of about US$ 21 billion.
But for McKinsey, a management consulting firm, these projects will experience a 25 per cent time and cost over-run on average, which in some sectors could go as high as 50 per cent.
In fact, over the past two years there had been a shortfall of 30 per cent in awarding projects in power generation, national highways and major ports, something that cannot be changed overnight.
What is more, decades of underinvestment in roads, ports, airports and power has left the country crippled by a severe infrastructure deficit.
Some experts suggest that comparing India and China in terms of efficiency is misleading because the two countries have very different legal and political systems. In China for instance the government can seize land by force despite protests by residents, whereas in India the authorities have to take into consideration due process and the rights of citizens.
In the end foreign investments will play a crucial role. Foreign investors are already playing a positive role in telecommunications, energy, ports, airports, roads and railways.
New Delhi is also expected to provide long term financing in these sectors.