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Infrastructure gets foreign boost - Views on News from Equitymaster
 
 
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  • Sep 18, 2009

    Infrastructure gets foreign boost

    External observers often comment that one of India's biggest mistakes over the years has been its neglect of basic infrastructure. As a result, the ever burgeoning population has completely outgrown the available amenities. Fortunately, there are signs that things are now improving.

    In 2005, the first UPA government had approved a twin corridor railway project - the 1,500 km long Western corridor linking Mumbai to Delhi and the 1,800 long Eastern corridor linking Punjab to Bihar. As per a leading business daily, the union cabinet has put the Western corridor project back on track by approving a 30 year Japanese loan for Rs 177 bn the same. The project is expected to in turn spark industrial investment to the tune of Rs 2.4 trillion. Of course, there are strings attached to the loan in term of Japanese companies getting a bulk of the contracts.

    In another development, the World Bank will provide loans to the tune of US$ 3 bn towards converting more than 6,000 km of one-lane highways into two-lane highways. The Union Road Transport minister, Kamal Nath has said that private sector investment into sector over the next few years could be as much as US$ 45 bn out of the total US$ 80 bn. That will make it the largest private public partnership in the world. In fact, the latest union budget has also emphasised the growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country.

    It may be noted that the amount to be spent on infrastructure has been estimated to be US$ 500 bn during the eleventh five-year plan. However, in our opinion, timely execution of these projects remains a cause of concern. Not only do most projects get delayed thereby leading to cost overruns, they leave a lot to be desired in term of design and structural safety. India's infrastructure face not only financial challenges, but also issues like disputes in land acquisition, rehabilitation, contractual issues, shortage of raw materials, capital goods and fuel, environmental disputes and inadequate availability of skilled manpower, amongst others. Nonetheless, there is no way of avoiding the infrastructure challenge if India has to fulfill its dreams of becoming an economic superpower.

     

     

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