When the Indian economy is striving hard to recover, the focus on infrastructure investments should be more realistic and informed by feedback from the private sector and the states. Explain (200 Words)
Refer - Business Standard
Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
· Infrastructure investments also have a strong multiplier effect on growth. Going by the National Infrastructure Pipeline, an annual average infrastructure investment of over Rs 17 trillion for a period of six years would have certainly boosted India’s economic growth. Financing such investments would have been a big challenge.
· With Covid-19 and the national lockdown for over 40 days having dealt a devastating blow to the economy.
· The report of the National Infrastructure Pipeline notes that annual infrastructure investments in the last few years have stayed within a range of Rs 8-10 trillion.
· Yet, the task force’s revised break-up of investments by the Centre, the states and the private sector raises many questions.
· The Centre’s share in such investments is retained at 39 per cent and the private sector’s share is reduced to 21 per cent. But the states’ share is raised to 40 per cent.
· From all available indications, the finances of the states after Covid-19 are in far worse shape than those of the Centre.
· The states had budgeted for a total capital outlay of about Rs 5.7 trillion, against the task force’s infrastructure investment target of Rs 5.77 trillion.
· No estimates of the private sector’s investments in the infrastructure sector are officially available. But the extent of the shortfall even for the first year of the plan is quite large and this happened in a year which was yet to be impacted by Covid-19.
· Now, consider the infrastructure investment projections for 2020-21 and 2021-22, and the impracticality of setting such targets will become obvious. The states will have to ramp up their investments in infrastructure to over Rs 8 trillion in 2020-21 and the Centre too will have to more than double its investments over what it had spent in 2019-20. The private sector also will have to raise them to over Rs 4.5 trillion in the current year.
Aradhana Tiwari 5 years
The onset of the coronavirus pandemic has wreaked havoc across the world. India, apart from the pandemic faces various massive challenges like - ensuring the safety and the well-being of its poor and marginalised living in urban agglomerations, etc. In such situation, India needs a robust and resilient infrastructure system supported by adequate private investments.
>>>Major constraints faced in the path of infrastructure investments are ;
- availability of funds for financing large projects,
- lengthy processes in land acquisition and payment of compensation,
- environmental concerns,
- time and cost overruns due to delays in project implementation,
- procedural delays
- the lack of dispute resolution and contract enforcement
- lesser traffic growth than expected increasing the riskiness of the projects resulting in stalled or languishing projects and shortfall in funds for maintenance.
For the government, the big challenge would be to walk the talk and recreate a PPP (public -private -partnership) environment that encourages the private sector.
>>> Challenges faced by PPP in India :
- Construction/implementation risk, arising from delay in project clearance; contractor default; environmental damage.
- Market risk, arising from insufficient demand;
- Finance risk, arising from inflation; changes in interest rates; increase in taxes, Change in exchange rates.
- Operation and maintenance risk, arising from the termination of the contract;
-technology risk
- labor risk
- Legal risk, arising from changes in law; changes in title/lease rights; insolvency of developer/service provider; change in security structure.
>>> Way Forward :
* The success of Public-Private Partnership (PPP) to a large extent depends on ;
- Optimal risk allocation among stakeholders,
- the environment of trust among stakeholders,
- robust institutional capacity to undertake the implementation of PPP projects.
* Further to foster the successful
implementation of a PPP project;
- a robust PPP enabling ecosystem including liquid and diversified financial institutions;
- sound regulatory and arbitration framework;
- mature developers and experienced consultants etc. is essential.
>>> Conclusion :
A mature PPP framework, along with a robust enabling ecosystem shall enable the Government to accomplish nation building and to recover Indian economy. PPP must not be a short cut only to save money or bridge fiscal gaps or transfer risks; it should be used to improve service quality or bring efficiency improvements.
IAS Parliament 5 years
Avoid listing out the points, general statements and try to explain it. Try to add data to support your arguments. Keep Writing.
vivek attri 5 years
Do I need to change handwriting?
IAS Parliament 5 years
No need to change the handwriting, readability and content is more important. Try to underline the key points. Keep Writing.
