India Begins Galloping

Reforms undertaken by the Modi regime have helped India improve its ease of doing business rankings. Modinomics has unlocked our infrastructure potential

The World Bank’s Ease of Doing Business (EODB) ranking, that saw India’s spectacular rise by 65 places from 142 in 2014 to 77 in 2018, has been one of the highest points of the Narendra Modi dispensation. The ranking is further buttressed by the Paris-based International Energy Agency (IEA), which in its 2018 report said that 100 per cent electrification of all villages in India is the biggest success story this year in terms of providing universal energy access. Undoubtedly, India’s dramatic jump in global rankings in the last four years is a manifestation of holistic improvement on the ground. For instance, till April 2014, under the erstwhile Congress-led coalition, the average construction rate of highways stood at barely 11.67 km per day. The current BJP-led regime, however, more than doubled the rate to a solid 27 km per day in fiscal 2017-18. The Modi Government built 9,829 km the last fiscal; 8,231 km in 2016-17; 6,061 km in l 2015-16; 4,410 km in 2014-15.

For 2018-19, the Ministry of Road Transport and Highways is set to achieve an ambitious target of 45 km per day by building more than 16,400 km of roads. It is worth noting that the first four years of the Modi dispensation saw 73 per cent more highways being built, versus the last four years of an inept Congress-led UPA-II. With close to 200 road projects worth more than Rs 1.5 lakh crore heading towards completion by mid-2019, the BJP-led coalition has given infrastructure push a whole new dimension. Again, 416 ongoing and residual projects worth Rs 3.26 lakh crore that are being implemented by the National Highways Authority of India (NHAI) and are in various stages of completion, will boost the GDP numbers dramatically in the next few years. Around 28 ongoing projects in Rajasthan worth Rs 21,292 crore and 26 projects in Madhya Pradesh worth Rs 16,245 crore stack up the numbers.

The Indian cement industry expects a robust volume growth of eight to nine per cent in the current fiscal, thanks to projects from the Railways, like the mega station development initiative worth one lakh crore rupees, dedicated freight corridor projects, Mumbai metro rail, Bullet Train project, among others. Work on the re-development of 400 railway stations into world-class facilities at a cost of Rs 96,000 crore has already started with the commissioning of work on Gomti Nagar Station; while work on other stations, like Thane, Lucknow, Kota, Nellore, Ernakulam, Madgaon, Delhi Sarai Rohilla and Puducherry among others will be taken up soon.

In May 2014, when the BJP dispensation took charge, highway projects worth over one lakh crore rupees were languishing for either want of funds or failure to get regulatory clearances. Under the Congress regime, trust deficit, policy paralysis, cost and time over-runs, flawed risk sharing practices, poor governance, stark misuse of funds and failed supervision led to a complete collapse of public-private partnership (PPP), which relied largely on build operate transfer model.

True, while the old PPP model has not been entirely discarded due to past contractual obligations, in a clear and decisive break from past hackneyed economic conventions, Modinomics largely opted for Engineering, Procurement and Construction (EPC) model to fast-track infrastructure projects. EPC is a far more efficient model with better supervision, single nodal point of responsibility, guaranteed price, timeline, delivery schedules, higher accountability and in the long run, more value for money.

Again, steps to revive commercial vehicle and truck segments, streamlining the exit policy, easier land acquisition norms, as also the ‘hub and spoke’ model of distribution, that is now being followed by more businesses in the consumption-driven sectors due to the new GST law that came into effect in July 2017, are factors that have all combined to create a virtuous cycle that has fostered a blistering pace of speedy project execution in the last four years.

In October 2017, in what can generate 142 million man days of employment, the Modi Government approved the Rs 6.92 lakh crore 83,677 km ultra mega road and highways plan that includes 34,800 km of Bharatmala Pariyojana, that will cover 500 districts from the current 300, thereby aiming to raise the number of corridors to 50 from the current six, moving 80 per cent of the freight traffic to national highways from the 40 per cent currently, by connecting 24 logistics parks, 66 inter-corridors, 116 feeder routes and seven North-East multi-modal waterway ports.

That Modinomics has walked the talk in terms of unlocking India’s infrastructure potential can be guaged by the commissioning of the country’s first ever multi-modal terminal on the Ganga river in Varanasi as part of a larger plan to build multi-modal terminals in Sahibganj and Haldia too. November 12, 2018, will go down in the history of India as a landmark day that saw the country’s first inland voyage after India gained independence in 1947. For the first time ever in post-independent history, after 70 long years, a container ship on India’s very own inland vessel, MV Rabindranath Tagore, carrying 16 containers of PepsiCo, successfully docked in the holy city of Kashi.

What a pity that the Congress, that ruled India for much of the last 70 years, left India’s rich 7,500 km coastline completely underdeveloped, with the share of goods transported via India’s inland waterways, at less than one per cent. In sharp contrast, the 1,390 km Ganga water course is only one of the 111 waterways spanning 20,276 km that the Modi Government is either planning to revive or build.

Ditto goes for Sikkim that became a State in 1975 but got its first airport, the Pakyong airport spread over 201 acres, at a height of 4,500 km above the sea level, only in 2018. Thanks to the vision of the current BJP-led Modi dispensation. To cut to the chase, it is undeniable that the spectacular push to India’s infrastructure story under Prime Minister Narendra Modi laid the foundation for India scaling 10 per cent GDP growth.

As a rule of thumb, to achieve 10 per cent GDP growth, India’s tax-to-GDP ratio would have to rise by at least another three to four per cent, public investment to GDP would need to go up from the current 32 per cent to 40 per cent and infrastructure investment ratio would need to rise to eight per cent. Is this possible? Of course, yes! Demonetisation has not only led to financialisation of savings but widened the tax base meaningfully in the last four years, with the number of tax filers going up by 80.53 per cent from 3.8 crore to 6.86 crore between 2014 and 2018. Equally, GST collections of Rs 6.8 lakh crore between April-October 2018, translating into a monthly run rate of a solid Rs 97,143 crore, is great news.

Tax collections always see a disproportionate spike in the last quarter of ever fiscal year and if the Government collects Rs 6.2 lakh crore between November and March 2018, chances of which look very bright, on the back of a laudable Rs 1.01 lakh crore collected in October 2018 alone, the budgeted target of Rs 13 lakh crore for fiscal 2018-19 will be easily met.

For example, tax to GDP ratio at 11.9 per cent in fiscal 2017-18 was the highest ever since fiscal 2007-08. A target of 12.1 per cent in fiscal 2018-19 may again well be exceeded. In the next four to five years, even at the current run rate, getting to a tax to GDP figure of 18-20 per cent is pretty much par for the course, with the number of direct tax payers likely to double to almost 14 crore, maybe more. Speaking of public investment, getting to 40 per cent of GDP is possible only if more resources are made available, which in turn mean banks have to be willing to lend to investible projects.

The Rs 2.11 lakh crore bank recapitalisation plan announced last October, which includes Rs 1.35 lakh crore of recapitalisation bonds, Rs 18,000 crore of budgetary support and Rs 58,000 crore of share sales, coupled with the pathbreaking Insolvency and Bankruptcy Code, will go a long way in recoveries and upgrades for the banking sector, besides, of course, boosting credit inflow into commercially viable infrastructure projects.

Last but not the least, recent measures to empower India’s 36 million odd MSMEs, the backbone of Indian economy, including a turnover based classification, mandatory 25 per cent procurement by PSUs and Government agencies, in-principle approval for a one crore rupee loan in flat 59 minutes, compulsory onboarding of CPSUs and corporates with a turnover in excess of Rs 500 crore, on the trade receivables and e-discounting system platform and, increase in interest rebate for MSMEs from three per cent to five per cent, in both the pre shipment and post shipment periods, are all measures which will set the stage for a 10 per cent GDP growth for India, which is there for the taking.

Source:DP

Image Courtesy:BT