Saturday, September 26, 2020


Back on Hope Street



There are signals already from the new government that it means business on the infrastructure front says SHRIKANT RAO



May is a month, which as its very name suggests, is fraught with possibilities – and therefore remains strong on hope. Ergo, barely a couple of days after the nation unanimously – read with a thumping majority – catapulted Narendra Modi and the BJP into the political hot seat in New Delhi, there is a churn already visible within the new minders of government which silently screams Action! 


The result is a sigh of relief not just from the captains of Indian industry, and the hoi polloi, but also from the financial canyons of Mumbai’s Dalal Street. That the markets have rallied is to be expected, but this new groundswell of hope requires to be tempered with the mantra of pragmatism as the new government earnestly goes about its urgent business of reviving India in the economic ICU. It will be a veritable trial by fire through the first 100 days of government. Happily enough, we are seeing urgency like never before, as witness the slew of declarations on the infrastructure front. 


In the last few years, key infrastructure projects across various sectors have suffered significant delays and the previous UPA government struggled to award new projects in sectors like highways as private developers have stayed away. Now with the formation of a new political dispensation the emphasis will be on the removal of blocks, development and expansion of national infrastructure such as highways and roads, ports, railways, manufacturing hubs, dams, canals and irrigation. The flurry of announcements of improvements in various areas offer an indication, or at least an approximation, of what the country can expect on the ground in the foreseeable future. 






The much beleaguered roads and highways sector is expected to see remedial action from the central government. The past few years has witnessed a significant subtraction and slowing down in the award of road and highway projects primarily due to land acquisition issues, environment and forest clearances, arbitration and compensation claims. With the ambitious road development plans being hit very badly the roads and highways ministry under the Modi government has prepared plans for the immediate rollout of road projects to the extent of Rs 12,000-13,000 crore. This includes the Rs 6,500-crore Delhi-Meerut expressway project to be undertaken with private investment. The projects that engage the attention will be those related to 2-laning and 4-laning across states like Punab, Kerala, Odisha, Uttar Pradesh, Andhra Pradesh and Rajasthan. It is learnt that the Cabinet will give its final nod once the Public-Private Partnership Appraisal Committee gives
its approval.






Soon after his assumption as the Prime Minister of India, Modi has given his go ahead to the government to set into motion the task of modernising and strengthening the Indian Railways, and the launching of a national high-speed rail networks – bullet trains or the Diamond Quadrilateral Project, to give it a name. This is very much in line even with his past thinking as Gujarat Chief Minister and subsequent poll manifesto pledges and election speeches. The key rail corridors regarded as a priority are a 525 km link between Mumbai and Ahmedabad – which Modi is keen to project as a showpiece project – and a 1,000 km line between the national capital and Patna. The experience of speedy administrative clearances under his stewardship in Gujarat, which occupies the biggest percentage of the Delhi Mumbai Industrial Corridor, should definitely be encouraging for various players in terms of the new opportunities opening up. A meeting of the chairman of India's High Speed Rail Corporation (HSRC) Satish Agnihotri, head honchos of the Indian Railways (IR) and the French National Railways (SNCF) is understood to have developed a detailed business plan for the corridor. The prefeasibility study of which has been completed by a consortium of Systra, Italferr and Rites. Japan International Cooperation Agency (Jica) is currently preparing a detailed study of the proposed $12.1billion corridor which is scheduled to be submitted soon. Jica has agreed in principle to part-finance the project by way of a soft loan. A prefeasibility report by Mott Macdonald on the 1044km New Delhi - Patna line has also been submitted and is under the ministry's consideration It is not just the high speed rail projects but also work on the metro rail projects across India and work on large infrastructure projects like the various Industrial Corridors, the Dedicated Freight Corridors that will receive emphasis. Besides, work on developing inland waterways, non metro airports and creation of ports will also be expedited.






The need for growth corridors will significantly boost warehousing and logistics facilities not to mention real estate requirements to accommodate the increasing population – both in residential and commercial.  The government will have to aggressively pursue its plan to develop satellite towns and cities – even creating new cities – since from a point of view of sustainable expansion of existing metros will prove to be counter-productive. Those urban agglomerations are already faced with issues like overcrowding, infrastructure bursting at its seams, high costs of living and a history of civic neglect. The Modi government, taking off from the UPA’s plan to construct 70 smart new cities across the country, has promised to take that tally to 100. Admittedly, the growth of real estate in the hinterlands connected to the corridors will be huge. This will mean a big challenge for developers and all players associated with infrastructure development in ensuring that sustainable construction across the new urban zones takes place. To ensure that the urban development on the cards is well planned, the government will be required to take urgent steps like easing land acquisition parameters, expediting grant of regulatory approvals, fiscal stimuli to bolster industrial growth, and creation of investment-friendly real estate market through lowered interest rates and increased employment generation. Moreover Modi’s promise to implement an affordable housing policy and bring home within the reach of every Indian family presents not just a $150 billion business opportunity to the real estate sector, which has for long been campaigning for industry status, for but also affords a chance to the nation to rid itself of the fault zones. With the stock market improving and the rupee recovering from its earlier slide buyers and investors – both domestic and foreign - are expected to swing back to action bringing much needed respite to developers.  Fund flows into the urban housing zone are expected to ease considerably. On the consumers side there is great optimism that the new government will influence real estate pricing, inspire a reduction in home loans and create tax benefits for buyers. The construction industry which stimulates infrastructure-building and creates growth opportunities for other industries and economic segments, will be pinning its hope s on the government to bring policy changes which debottleneck infrastructure projects and increase investments in the sector leading to accelerated growth. If the planned investments go through, one can expect a turnaround in manufacturing particularly with the demand of Construction Equipment including earthmoving equipment, concrete equipment, material handling and road building equipment rising.  The other crucial areas which will engage the government’s attention would be Power, the setting up of Smart Grids, and river interlinking, besides of course the challenge of taming prices with fiscal consolidation. 


Admittedly policies to revive growth in India will have to be rooted in increasing investments, particularly in infrastructure. Right now investors are betting big on the Modi government reviving the India Growth Story. And thankfully there appears a ring of inevitability to project implementation.

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