When the going gets tough, public investment must be stepped up to pump-prime a slow-moving economy facing uncertain headwinds of low commodity prices and faltering international trade. When the going is good, the private sector would also have a role to play, > Finance Minister Arun Jaitley has said, vowing to ramp up infrastructure investments in 2016-17. Ten months ago, in his first Budget for a full financial year, Mr. Jaitley had scaled up such investment to Rs 1.25 lakh crore, two-thirds of which was earmarked for road and railway projects. In the coming year, he has indicated that the priority will be rural infrastructure as the stress in India’s villages after two bad monsoons has hit demand. This is deterring fresh private investment, with many firms still struggling with past investment plans that are stuck or have become unviable. While economists debate whether the >government should stick to its fiscal consolidation road map or scale up public expenditure to spur the economy, nobody will mind if a slightly higher fiscal deficit leads to more jobs while creating useful public assets. Low oil and commodity prices offer the chance to build more infrastructure at a far lower cost, but as Mr. Jaitley said, “We must have the intellectual honesty to analyse our shortcomings and improve them.”
So have higher allocations to infrastructure spending this year helped? Anecdotally, a few signs are positive. >Demand for bitumen, a key ingredient for building roads , has risen, as have enquiries for construction and earth-moving equipment. Paying private contractors to build highways has boosted cash flows and enabled a few to re-enter the fray for new projects. But all is not well yet. Core sector performance hit a decade’s low in November 2015. “Though public investments have started to gain traction, this is yet to reflect in the performance of investment-linked sectors,” rating agency Crisil said, as demand remains weak in end-user sectors such as real estate, with overcapacity in others. Of course, this is partly the lag effect — infrastructure projects take time to show results. Yet, an honest introspection should reveal the need to utilise public infrastructure budgets more effectively without the cost- and time-overruns associated with the government’s ‘business as usual’ approach. Take India’s largest industrial infrastructure project, >the Delhi-Mumbai Industrial Corridor, set up as a special purpose vehicle to shed the legacy burdens of departmental decision-making. It’s crawling, though all the States along the corridor except Delhi are run by the BJP. Or the Project Monitoring Group under the Cabinet Secretariat tasked with resolving stalled projects, on which not much has been heard in months. Could the fact that these bodies were left without a head through most of 2015 have affected performance? Tapping the Consolidated Fund of India as well as innovative vehicles such as the National Investment and Infrastructure Fund is laudable. Perhaps, it is also time to find a few good men who can get the job done on the ground, grant them autonomy and fix accountability for outcomes.
