CHENNAI, India — India’s infrastructure presents a frightening scenario, and some feel it is at the breaking point. One reason for this is that the world’s cheapest car is about to hit Indian roads. The Nano’s most basic model is pegged at $2,600 — only a little more expensive than a motorcycle. It is aimed at capturing a significant part of the two-wheeler market, fulfilling the dreams and desires of those who want to travel in the comfort of a car.
But this convenience comes with a penalty. Broadcasters warn of road congestion, particularly in cities and larger towns, that will worsen as Nanos replace motorcycles.
Road space in Indian cities is woefully inadequate: It is 18 percent of total city area in Delhi, 11.9 percent in Bangalore, 10 percent each in Mumbai and Chennai, and 6 percent in Kolkata. Ideally, road space should be closer to 30 percent.
Equally alarming is India’s road density. Hyderabad’s, in southern India, is the highest with 2,337 vehicles per kilometer, while road space is merely 6 percent of the city’s area. With over 10,000 new vehicles being added to the city roads (at least until the global financial crisis hit India), the problem is being compounded. The figure for Mumbai is 448, while it is 345 for Kolkata and 184 for Delhi. This is a bleak picture.
As for mobile telephony, there are 300 million users in the country today, and their number is growing. But lack of an adequate number of communication towers leads to poor reception and occasional broken connections.
The scene is similar to that of India’s fixed land-line system in the 1970s. Existing infrastructure cannot cope with the increasing number of mobile connections.
Successive governments in India have neglected basic infrastructure for profits. Raju Nagarajan, managing editor of The World in Dubai, draws a parallel with the Persian Gulf nation: “During the boom, Dubai’s crazy real estate prices and rentals were justified as market driven. Now people are beginning to talk of greed and feel that things should not have been allowed to spin out of control.”
During the boom, which has now ended, India’s industry expanded faster than the electricity grid’s capacity to power it; its air traffic outgrew its airports, raising issues of safety; and cars rolled out of factories quicker than roads could accommodate them.
In some plush upper-scale urban localities, each flat owner was given space for three cars. But people bought more and parked them on the road, impeding the free flow of traffic. In a caustic remark, Indian Prime Minister Manmohan Singh said “our cities have become living hells.” But who cared?
Now that the good times appear to be fading, a rethink on all fronts, especially the one on infrastructure, is extremely imperative. The government has realized this. It plans to spend an additional $4 billion on schools, roads, powers plants and other infrastructure projects.
It has directed the government-owned India Infrastructure Finance Co. to sell bonds worth $8 billion. The first tranches of bonds, offering 6.85 percent returns and a sovereign guarantee, were oversubscribed. The company will lend this money to banks, which will then pass it to infrastructure projects.
Indian banks do not really need help, as they are sitting on piles of cash, but they are paranoid. They do not want a repeat of what happened in the 1990s, when loans soured and the interest on them was not paid. Some loans were not even used. Vehicles had to be impounded and flat registration canceled when owners failed to meet repayment schedules.
Now that the economy is slowing down, the onus is on the government to push banks into a lending mode, though not as recklessly as they did in the past. Otherwise, the infrastructure deficit is so high that it could prevent India from achieving the prosperity that it has been aspiring to for so long. Without adequate and reliable supplies of power and water and a modern public transportation network, the chasm between India’s elite and 800 million poor will widen, potentially destabilizing the country.
Jagdish N. Bhagwati, a professor at Columbia University, has said growth of the gross domestic product would rise at least 2 percent if India had decent roads, railways and power.
At Gurgaon, in northern India, Delhi Metro Rail Corp. is building an elevated railway that will connect this satellite city to New Delhi. The project is financed by the federal government and a few state governments. The site is humming with men and material, belying the economic meltdown. Maybe this is the beginning of India’s infrastructure boom.
Gautaman Bhaskaran is a Chennai, India-based journalist.
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