The role of transportation and logistics in India's economic growth can hardly be overemphasized. An average annual growth of above 7% in the last decade has put enormous demand on the Indian infrastructure. However, increasing demand has failed to evoke much response from the government but has only overstretched the existing network. Thanks to infrastructure deficit in the country, the GDP growth has been knocked down by almost 2%.
It is not that that the government is blind to the gaping deficit in transportation infrastructure. Well, at least not on paper. It plans to invest around US$ 1 trillion in roads, railways and ports during FY12-FY17.However, it is one thing to plan and quite another to put it into action. Especially in India where vote bank politics and political ambitions rule above anything else. A glaring example of this was seen last month itself when the railway minister who proposed small fare hikes as a step in the direction of reforms was made to resign and all the progressive suggestions were rolled back. The colossal railway network still falls short of the required coverage and needs huge investments which are hard to secure unless the tariff structure is overhauled. And this is just one part of the problem. The country's maritime ports that can well be described as the backbone of the economy have received just 17% of the targeted investment. The outcome is obvious. In a period of five years, forget any advancements, the turnaround period for ships in Indian ports has increased by 31%. The roads transport sector, a vital link that takes care of two thirds of country's freight still remains under developed and of poor quality. The scenario is no different in the aviation segment either. Despite a higher penetration of the private sector, the airports are not equipped enough to handle increasing air traffic leading to higher freights, manpower cost and inefficiencies.
So what is the solution? A higher participation from the private sector will certainly help. However, now that the growth rate has slowed down and credit growth is lagging behind the historical trends, it will be a little hard to convince private players to lock capital in the long term projects. Not that there is a lack of demand, but the stifling policies and regulatory bottlenecks at each and every step have dampened the sentiments of investors and questioned the feasibility of such investments. To conclude, it won't be enough to provide budgetary allocation to arrest infrastructure problems in the country. The need of the hour is to create enough incentives for investments to occur and lot of work on the regulatory front.