Prime Minister Narendra Modi's government has begun a splurge on road and rail building that could remove doubts over whether economic growth in India is really overtaking China. Roughly doubling the spending allocations for roads and bridges in the fiscal year 2015/16 and raising the rail budget by a third, Modi government is banking that India is going faster.
"They have acknowledged that infrastructure is the big elephant in the room," said Vinayak Chatterjee, head of infrastructure services company Feedback Infra. "Once these measures are implemented, the elephant would start dancing, and with it the overall economy," he added.
The economy is growing at 7.5 percent in the quarter ending in March, easily outpacing China. Many economists doubt, the government statisticians’ new way of counting GDP, stating that it overstates how well India is doing. The government has prioritized by unblocking infrastructure projects that had been gathering dust, because of either an obstructive bureaucracy, a lack of private sector investment or in some cases public interest litigation.
Planned road projects will be costing around $17 billion in 2015 when compared with a budget allocation of around $7 billion. To cover most of the gap, the road ministry is planning to raise a $7 billion loan. “We don’t have enough money to build all these roads,” Rohit Kumar Singh, a mid-level bureaucrat at the ministry, told, “We need to leverage private sector funding.”
“You have to create an environment where investors and lenders can make a return,” Virendra Mhaiskar, managing director of IRB Infrastructure Developers Ltd, one of India’s largest road builders said. Consistent policy on tolls are to be put in place for the private sector to become more active, he added.
The government hopes that road building will accelerate to 30 km a day by the end of next year from 12 km a day at present, as it plans to award projects for 10,000 km of road in this year, up 25 percent a year earlier.
The government under the leadership of Modi is determined to develop India at a fast pace. Unlike the previous government, this government is making the people to feel the development happening in the country. This is a welcome step from the government for fulfilling the promises it had offered during the election campaigns.