Government bets on infrastructure to revive economy

Last month, NDA government decided to plonk down a massive Rs 7 lakh crore to develop over 66,000 kms of highways under the ambitious Bharatmala programme.

Published: 05th November 2017 09:15 AM  |   Last Updated: 05th November 2017 11:28 AM   |  A+A-

construction, economy, building, workers, labourers,  Infrastructure

Representational Image.

Express News Service

MUMBAI:  The NDA government seems to be placing all its bets on infrastructure to revive the sagging economy.

Last month, it decided to plonk down a massive Rs 7 lakh crore (including `1-2 lakh crore private investment) to develop over 66,000 kms of highways under the ambitious Bharatmala programme.

The aggressive push to increase public expenditure only confirms the intent to aid growth.It’s a no-brainer that infrastructure investment creates jobs, boosts growth and crowds in non-corporate private investment, which fell to a historic low and is refusing to rebound. As per estimates, an increase in public infrastructure investment by 5 per cent of GDP increases growth by about 1-1.2 per cent, which in the current circumstances appears highly essential. Growth has been slowing down for the past six quarters to touch an 3-year low of 5.7 per cent for the first quarter ended June, 2017.

The proposed investments can stimulate the economy, but its success relies on two key elements, which seem unfavourable right now.One, almost all road projects are implemented under the public-private partnership mode, but unfortunately, private firms seem to have lost their appetite. Many private infrastructure firms are burdened with debt and out of luck to commit fresh investments. Some are hawking non-core assets to reduce debt just to stay afloat. In this backdrop, how the incoming projects will be lapped up is unclear.

Two, despite all the brouhaha over India’s jump in World Bank’s ease of Doing Business ranking, areas like project implementation leaves much to be desired.It’s baffling that some of the government projects have been stuck for over 40 years at a stretch, either for want of approvals or finance. Take the Howrah-Amta-Champadanga railway project in West Bengal initiated way back in 1974 or the multi-state Nangaldam-Talwara rail line proposed in 1981 that are yet to see the light of the day. As on today, costs doubled and trebled respectively for both projects, but they remain non-starters.

In fact, as on July 2017, of the 1,257 central sector projects with an anticipated project cost of `17 lakh crore, nearly half or 668 projects have inadequate information about their commissioning schedule, meaning, we will never know how long they’d be delayed further or if they’d ever have a  completion date.

A mere 11 projects are ahead of schedule, and 304 on schedule, while 274 projects are delayed and 331 have cost overruns. Of the 1,257 projects, road transport and highways account as the highest number of projects at 480. Of this 63 projects are delayed and 42 projects have cost overruns. Similarly, railways — the second highest sector at 350 projects — a whopping 202 projects have cost overruns, while 33 are behind schedule. The other major sectors include petroleum and power, which together have 226 projects.

Some of the reasons for time over runs include delay in land acquisition, obtaining forest and environment clearances, lack of infrastructure support and linkages, delay in tie-up of project financing, changes in scope etc. Causes of cost escalation include under-estimation of original cost, fluctuations in forex rates and statutory duties, spiralling land acquisition costs and general price rise.

In order to reduce delays and prevent cost overruns, the government initiated several measures including an online monitoring system to track status of project implementation, has set up standing committees fixing responsibility for time and cost overruns. But despite constant efforts, project implementation is behind target. For instance, during April-June 2017, the NHAI worked on 670 kms of national highways, which was 42 per cent lower than the targeted 1,150 kms.

But the upshot is that there’s a significant improvement when compared to last two decades. An analysis of cost overruns in the last 18 years with respect to the originally approved costs shows that the cost overruns reduced from 36 per cent in March, 2000 to 11 per cent as on July, 2017. Likewise, the time over runs in the last 18 years fell from 45 per cent in March, 2000 to 22 per cent in July, 2017. This shows that various policies and control measures undertaken by the government seem to be doing delivering. 

Spending on Projects 
• Of the 1,257 central sector projects, 372 involve investment in excess of `1,000 crore each aggregating `13 lakh crore.
• 885 projects encompass investments between `150 crore and `1,000 crore translating to `3.8 lakh crore. 
• Among sector, Road Transport and Highways has the highest share with 480 projects and involving over `3.2 lakh crore 

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

facebook twitter whatsapp