Is the economic miracle a mirage

In the December quarter, the construction sector took a hit. The average net revenue of 156 firms in the mid and large-sized category, excluding L&T, fell by 9 per cent YoY. Road developers took a hit on account of toll collections, which were suspended for three weeks. Orders across infrastructure sector slid several notches. The road sector itself, as reported earlier in this column, has not been able to achieve its targets.

NHAI and the Ministry of Road Transport and Highways had awarded projects of about 3,200 km and 3,100 km, respectively, till mid-February. NHAI had watered down its forecast for FY17 from 10,000 km to 6,700 km. In nine months of FY17, the NHAI awards have dwindled by 8 per cent YoY. While the new hybrid annuity model (HAM) had many takers owing to PPP, lenders are reluctant given the overhang of past record liabilities. As per reports, only 15 of the 35 projects awarded under HAM have achieved financial closure and some have even been cancelled. Even if we factor in an achievement confidence index of 40 per cent on projected estimates, the aspirational scale is so huge that anything over 40 per cent would add a welcome spur to economic growth. As per Nitin Gadkari, Minister of MoRTH & Shipping, a national perspective plan under the Sagarmala project has been prepared and projects worth Rs 8 lakh crore have been identified. This can accelerate momentum in trade as with a 7,500-km coastline, our country transports only 6 per cent of its cargo through waterways compared to around 55 per cent on roadways and 35 per cent by the railways. As a result, logistic costs as a percentage of GDP is as high as 19 per cent compared to 12.5 per cent in China.

On the brighter side, the process to expedite government spending is in the works. With four more states falling with the ruling party, the agenda of development will step up activity locally. Uttar Pradesh, Uttarakhand, Manipur and Goa will toe the Centre’s diktat of development. The state budgets and their policies reflect the urgency to transform. This is evident from policies being introduced in creating a better business environment in Gujarat, Haryana, Maharashtra, Andhra Pradesh and Telangana. The most notable among the reforms are related to land and its use. Unlocking land for commercial and industrial use will lead to increase in economic activity.

If bad bank loans can now find a solution, we may return to an easy money era that would accelerate return on capital and bring back private investors. Only then will we be set for an economic miracle.

When will the good times roll in?

India is on a path of deep-rooted reform. Many initiatives have been triggered that will see fruition this year: Implementation of RERA (with a deadline of May 17), appointment of a Real-Estate Regulator, credit ratings of municipal corporations, issuance of municipal bonds by cities, introduction of GST, and much more. While these shifts do cause disruption in the regular flow of commerce and require systemic adjustment, India can afford this exercise as growth numbers are robust enough to absorb the shocks of change.

Now, however, all eyes are on public spending, which can bring the mojo back. An amount of Rs 3.96 lakh crore (against Rs 3.48 lakh crore the previous year) has been budgeted for infrastructure with Rs 2.41 lakh crore for transport alone. A separate amount has been provided for metro projects to the tune of Rs 18,000 crore and, similarly, among other schemes like Swachh Bharat, Bharatnet, Deen Dayal Jyoti Yojana, etc.

The government´s record last year gives us a reason to believe that spending has gathered momentum as the chains of bureaucracy are being delinked through transparency and accountability. However, it is important that the urgency shown in preponing the dates for the Budget should crystallise into an early disbursal of funds for the projects.

A favourable poll result for the ruling party will accelerate government programmes. Renewable power prices, including solar and wind, seem to have ushered in hope for improvement in production costs for India´s manufacturing sector. Labour costs have risen geometrically for all industries. Also, with rural electrification being implemented on a war footing and Bharatnet expected to make high-speed broadband on a fibre-optic network available by 2017-18 in more than 1.5 lakh gram panchayats, the aspirations of the population will explode countrywide. Lag in power availability stunted our progress; but states are resurrecting their power finances with UDAY.

Further, housing, which was the topic of our cover story last issue, is likely to gallop as it has now been given ´infrastructure´ status and the Central Government is providing interest subvention for ´affordable housing´. ´With an additional interest subvention of 3-odd per cent offered by states, housing demand can skyrocket,´ stated the Union Minister of Urban Development and Housing, while launching the new logo of CW at a conference organised by PHD Chamber in Delhi recently. What´s more, the smart cities mission is quietly making progress with 30 of the 60 identified cities having organised SPVs and appointed CEOs. Tenders are being issued and over 90 projects are underway. To discuss smart solutions that can be executed in the Indian context across cities, Smart Cities Council India is organising the 4th SM@RT CITIES SUMMIT at Pragati Maidan, New Delhi, from March 15-17. For details, visit

Indeed, the vote is for development all the way. And if all political parties realise this, we are likely to see development as a common agenda with each vying to outdo each other. Then, the good times would have truly begun.

Set for an infra-run

Data suggests that demonetisation has hit the pace of announcement of new investment proposals during the quarter-ended December 2016

The Union Budget has set the tone for 2017 by accelerating the growth agenda. The allocation for infrastructure at Rs 3.96 lakh crore, over Rs 3.49 lakh crore last year, will fuel the sector. Of the increase of Rs 47,000 crore, transport itself will consume Rs 24,000 crore.

The Railway Budget has been the largest-ever at Rs 1.31 lakh crore – an 8.26 per cent increase over the Rs 1.21 lakh crore allocated in 2016-17. Railway lines of 3,500 km will be commissioned in 2017-18 while at least 25 stations are expected to be awarded during 2017-18 for station redevelopment. Allocation for highways has been increased from Rs 57,976 crore in 2016-17 to Rs 64,900 crore in 2017-18. Around 2,000 km of coastal connectivity roads have been identified for construction and development.

The dark horse in the transport sector, the Pradhan Mantri Gram Sadak Yojana (PMGSY) has gathered pace. Last year, when I asked Minister Nitin Gadkari at a CII meet, why the PMGSY programme, which had tremendous potential, was not going anywhere – he responded that it did not fall under his ministry but that the government was working on an impetus for it.

The pace of construction of PMGSY roads has accelerated to reach 133 km per day in 2016-17, as against an average of 73 km during the period 2011-2014. And, the Budget has continued to provide Rs 19,000 crore in 2017-18 for this scheme. Together with the contribution of States, an amount of Rs 27,000 crore will be spent on PMGSY in 2017-18.

The other big bang boost has been for the housing sector. National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18. Affordable housing has been given the ´infrastructure´ status, which will enable these projects to avail benefits including interest subvention. Further, a target to complete 1 crore houses by 2019 has been set for the homeless and those living in kutcha houses.

Allocation for Pradhan Mantri Awas Yojana (PMAY) has been raised from Rs 20,000 crore in 2016-17 to Rs 29,000 crore in 2017-18. Owing to these reforms, there is a likelihood of an ample availability of affordable housing in the next three years.

Among other infrastructure projects, the Metro projects will see the introduction of a Metro Policy and higher allocation of Rs 18,000 crore, against Rs 10,000 crore in the previous year. AMRUT and the Smart Cities mission will continue to move forward with an allocation of Rs 9,000 crore, against Rs 7,296 crore, as 60 selected cities gear up to issue tenders for city development.

The Namami Gange project has been allocated an increase of Rs 100 crore from Rs 2,150 crore to Rs 2,250 crore. And, Sagarmala has received an enhanced allocation of Rs 150 crore from Rs 450 to 600 crore. The Swachh Bharat campaign is being vigorously run and the allocation has risen to Rs 16,000 crore. Armed with the demonetisation swell in the banks, the finance minister had some head room to hold back the temptation of hiking the service tax in view of the forthcoming Goods and Service Tax (GST), which was a big relief. Further, though the large corporate sector did not get the tax reduction, the FM reduced taxes by 5 per cent for the MSMEs, which have an annual turnover of Rs 50 crore or less, thereby benefitting nearly 64 lakh companies.

Issues that need further attention by the ministry include implementation of the projects. Even the irrigation projects, which found mention in his last year´s Budget speech where 23 of the 99 projects would require to be completed by March 2017, are likely to miss the deadline. As per CMIE, new investment proposals worth Rs 1.25 lakh crore were observed during the quarter ended December 2016. This is low compared to the average Rs 2.36 lakh crore worth of new investments seen per quarter in the preceding nine quarters of the Modi Government. Data suggests that demonetisation has hit the pace of announcement of new investment proposals during the quarter-ended December 2016. Two hundred and twenty seven new investment proposals worth Rs 81,800 crore were announced during this quarter till November 8, 2016. In comparison, only 177 investment proposals worth Rs 43,700 crore were made between November 9 and December 31, 2016.

As for stalled projects, though the current government was to invigorate the economy by debottlenecking and accelerating these, the data points to the contrary. CMIE capex figures show that year-end stalled project figures for 2016 are at their highest levels since December 1995. The total value of stalled projects has reached Rs 11.70 lakh crore in the December quarter, accounting for 12.11 per cent of the total projects under implementation. Among the prime reasons for which the projects are stalled, ´obstacles in environment clearances´ contribute to 20 per cent while ´lack of promoter interest´ seems to be a growing trend over ´land acquisition issues´.

However, the absolute value of new project announcements shows that 2016 ranks second best among the last five years. This means that but for demonetisation, the economy was set for a run. Even if we examine the performance for the road sector, the contracts awarded and the length of roads constructed in the highway sector has been way behind claims of the road ministry.

The status of construction awarded and completed during September 2016 vis-a-vis targets set forth for 2016-17 are as follows:
However, the stage is set for a revival of the tempo. The Dispute Resolution Bill, release of funds for cases stuck in arbitration, reduction in interest rates, resolution of some severely stuck road projects, consolidation of some road assets and the infusion of some foreign capital, which has come to the rescue for some developers – all has signaled the dawn of the good times by Diwali 2016. And now, with the demonetisation impact easing up, the delayed dawn of good times is on the horizon again.

Can the Budget bring the mojo back?

Demonetisation has dealt a body blow to the economy whether we like it or not. It has delayed the uptick in the economy by a minimum of several quarters. The informal economy is in tatters and the business outlook is glum.

But it is done and nothing can be done about it. Building a cashless economy is a long-term goal but given the fillip provided owing to the diktat, digital payments and the infrastructure required for their enablement are set to leapfrog.

The argument that the informal economy can become part of the formal economy by such legal leverage is flawed. On the contrary, when the fruits of development ripen under the formal economy, they beckon with sweet dividends. But this, too, is more likely to happen provided the formal economy offers infrastructure to enable ´ease of doing business´. Currently, the formal economy is low down in the rankings globally and has barely moved up a notch despite fervent campaigns trying to create a favourable pitch for the same.

The reason it is not being reflected is because the constituents, like the legal system for enforcing contracts, resolving insolvency, obtaining construction permits, are not tuned in to this level of efficiency. They need overhauling. The Insolvency and Bankruptcy Code 2016 has just got notified and has been activated in the last quarter. But why are we ranked 172nd in paying taxes? If we want more and more tax payers, the process should be made payer-friendly and easy to comprehend and observe. Disillusionment with the formal economy will always encourage new entrants to find easier, unlawful ways of avoiding taxes. Starting a business, too, is a difficult proposition. Then, how can we create and harness young talent, which is the true demographic dividend? Thus, only when the states make it easy to do business will the informal economy take lessons in joining the formal economy.

For instance, dealing with construction permits is a nightmare. State governments need to bring down the number of permits and arrive at a one-window solution. The Model Building Bylaws introduced earlier this year provide a framework for online approvals for building and construction projects in urban areas, including simplified environmental and other clearances within 30 days, and encourage self-declaration. Similarly, various states need to adopt the Real-Estate Regulation Act to make the shift. Here, the act has stiffened penalties for the developers, but has kept no onus of delay in permissions on the authorities, leaving the developer exposed to the mercy of the authorities.

Meanwhile, roads need to step up the acceleration. Up to November, the total length of road contracts awarded has been 5,688 km and the length of roads constructed 4,021 km, which is 12 km per day.

A huge development in the Northeast under NHIDCL is underway, covering a length of 8,007 km to be executed at about Rs 100,000 crore. And, in urban infrastructure, from January to December 2016, a total investment of Rs 272,380 crore has been approved for the smart city plans of 60 cities, AMRUT, PMAY (Urban), new metro projects, Swachh Bharat Mission (Urban), and redevelopment of seven Central Government residential colonies in New Delhi.

Public spending will need to further be stepped up to create employment opportunities for the informal sector. The Budget is expected to reduce taxes, offer incentives for using digital payments and announce major initiatives in public spending. The growth momentum had just about begun to accelerate when November 8 struck. Now, that mojo seems elusive. Can the Budget bring it back?

PS: The Union Budget is scheduled on 1st February, a big change in practice followed ever since we became independent. Construction World too is making a big change. Watch out for the February issue!

White knight wanted after black money battle

There are very few events etched in the memories of an entire generation. For the Americans, it was the 9/11 attack and the Lehman brothers collapse. For Indians, it was the Kargil skirmish, the 26/11 terror attack and, now, demonetisation.
This bold and moral move by the PM has had its share of execution challenges, the consequences of which are grave. At just about the time when the green shoots, as reported in this column, began to stabilise, the land beneath them was scorched. Real estate, consumer goods, jewellery and the informal business segment of the country have been victims of a frontal attack. Businesses have reported a loss of 30-40 per cent in revenues. The momentum of money has ground to a halt. Banks have run out of money to dispense. Fortunately, the government is course-correcting rapidly. It is ready to launch an extension of the ´Voluntary Disclosure Income Scheme´, where a tax of 50 per cent would give unaccounted money a holy dip with another 25 per cent of the money being subject to a zero interest bearing bond for four years, thus allowing the offender to circulate 25 per cent of his declaration in an official form. This would effectively cost the declarer 57 per cent. The challenge is that there are several ´start-up gangs´ that have reinvented the art of conversion at a lower cost of 25 per cent. So although the money remains tainted, legal tender is received in place of the obsolete notes. This would dampen the response to such conversion.

Unless we are able to increase the number of tax-paying individuals from the current 30 million to at least 45 million, the effectiveness of the demonetisation exercise may remain in question. The country, however, has improved its image by portraying a robust financial system that has been able to withstand such staggering logistics.

That said, real estate has suffered a big blow. According to a report by PropEquity, housing prices in 42 major cities across India could drop by up to 30 per cent over six to twelve months, wiping out over Rs 8 lakh crore worth of market value of residential properties sold and unsold by developers since 2008. The bigger casualty is employment, which is likely to suffer a setback.

This may be one of the stiffest challenges that the Modi Government will face. Our CW issue with Minister for Skill Development and Entrepreneurship Rajiv Pratap Rudy has already highlighted the fact that improvement in skills for 35 million workers was a prerequisite for desired growth. However, demonetisation has severely hit the informal sector, which will need to undertake some costs to come into the formal economy. Targeting benefits to reach the right segments would require precision and agility on the part of the government.

On the brighter side, interest rates are set to come down. Income tax rates, too, will ease up
The cycle of low rents and high interest is likely to turn with interest rates softening up and rents hardening. Public spending will continue to drive economic sentiment. Private-sector spending will defer all plans but overseas investments with a stronger dollar may rise if the Fed rates remain easy. But there is a fear that the Federal Reserve may increase the rates and just as $3.18 billion fled the country in November alone (the steepest selling in equity and bonds by foreign institutions in the past three years), such a trigger may depress our outlook.
As the government brings in more money to be accounted for in a formalised manner by curbing black money, it needs to set benchmarks for the use of this money, especially the money managed and run by it. Only 15 of the 74 loss-making PSUs have been asked to shut shop so far. With more and more digital mechanisms in place in the government, it needs to relook at its hiring policies and shed some weight by moving experienced bureaucrats into management positions of SPVs, which are JVs under the PPP mode.

The fight against black money will also need to provide a balm for those wounded as part of collateral damage, to keep up the spirit of the population that is supporting this moral battle.
We need a ´white´ knight!

Win some, lose some

The balance between social good and infrastructural development is a delicate one. A citizen has a constitutional right to be provided basic amenities but the nation has limited resources, further constrained by a poor administrative system of collection of revenues, making it necessary to depend upon private investment. Private investment has to serve the profit motive, which in turn conflicts with the ´right to be served´ of the citizen.

The recent judgement by Allahabad High Court has split this wound wide open. It denied Noida Toll Bridge Company, which has been awarded the contract of collecting toll from passengers for 30 years, the right to continue collecting toll as it claimed that the concessionaire has earned reasonable profits. Even the Supreme Court has not entertained the plea of the defendant. It has noted that ´the Concessionaire, according to their own financial statements, has recovered Rs 810.18 crore from toll income from the date of commencement of the project till March 31, 2014, and after deduction of operation and maintenance expenses and corporate income tax, the surplus was Rs 578.80 crore (computed before interest, depreciation, and lease rental received by the Concessionaire)´.

Many issues need to be addressed here. Are contracts that provide service to citizens but allow the company providing the service to make profits, void? If power companies, airport operators and port operators can make 16 per cent return or more, why not toll concessionaires? Will this not have a retrograde effect as was the case with retrospective tax, which drove foreign investors away? How will the government, then, fund such projects?

Only funds with a long payout date that are ultra conservative will invest in these projects, provided the government provides sovereign guarantees. Noida Toll Bridge Company is a public-listed entity and its business plan comprised the returns from this project alone. By withdrawing the company´s right to earn tolls, the courts have made the government renege on its commitment and kill shareholder value, apart from scaring away potential investors in such projects. The risk quotient has spiked and shareholder value in such projects has eroded. Moreover, this will set a trend as local leaders with political ambitions will join protests to derail user charges and win the favour of voters.

Meanwhile, GMR has won an arbitration order of $270 million against the Maldives government, which had arbitrarily cancelled GMR´s contract to run its airport. The compensation covers the debt and equity invested in the project along with a return of 17 per cent, as well as termination payments and legal costs.

It´s true what they say – you win some and you lose some! On October 21, 2016, though, we had a room full of winners. This issue brings to life the magical evening that recognised India´s Fastest Growing Construction Companies and Top Challengers. The jury is playing a more responsible role than ever before as it serves as a moral guardian for the integrity of the awards process through its acumen and judgement. Raghav Chandra, Chairman, National Highway Authority of India, hit the nail on the head when he said, ´Construction is an intimate affair.´ His sentiment was echoed by Dilip Suryavanshi, along with Devendra Jain of Dilip Buildcon – while accepting the award for the fastest growing construction company in the large category, he said, ´When my competitor sleeps, I am at work, and the top management needs to be intricately involved in the management of men, materials and machines to deliver a sterling performance.´

We are happy to have been able to bring this evening to your homes by webcasting it live; in case you missed it, you can watch it at Meanwhile, enjoy some of the highlights in this issue. Here´s wishing all our readers a happy and prosperous new samvat year!

Set for growth

Last month, in a swift move at the recommendation of  NITI Aayog, the government reversed the misery of construction and infrastructure companies. In this column last month, I had pitched for a resolution to the impasse on matters stuck in arbitration, disputes and appeals. So while the ruling has now provided that the company in question is not squeezed to death of its finances and left to dry, and this takes care of the financial disease such companies come down with, the core attitudinal shift causing this legal pileup has not been addressed.

That said, the ruling has led to the rerating of construction and infrastructure stocks at the bourses. Companies planning InvITs will see better valuations. Huge funds are likely to come back into the system to companies like HCC, Patel Engineering, Sadbhav, IRB, etc. While this augurs well for equipment companies, there is also likely to be a shift in the list of bidders for EPC and hybrid annuity contracts issued by MoRTH
and NHAI.

Meanwhile, real-estate companies are experiencing rough weather as the consumer protection movement is gaining momentum. Several companies like Unitech, Supertech and Parsvanath have been instructed by courts to return the money invested by those who have booked flats where either the companies have not presented a ´true and fair´ picture of the offering when they raised investments from buyers or violated deadlines for delivery. The Real Estate Regulation Act (RERA) has sent a shiver down the spines of developers as rulings have begun to send developer after developer behind bars for violations and misrepresentations, non-delivery and unfair practices. Consolidation is already in progress in this sector as several stressed developers have made alliances with financially stronger partners to bail them out. Ajay Piramal´s real-estate fund initiatives have rescued many of them too. New money is coming in under changed conditions seeking fresh rules for play.

The Smart Cities mission has released 27 additional cities, taking the total number of cities selected under the mission to 60. The new cities are from 12 states and have proposed to invest a total of Rs 66,883 crore under their respective city development plans. The amount includes Rs 42,524 crore in area-based development (79 per cent of the total) and Rs 11,379 crore (21 per cent) in technology-based pan-city solutions. With this, the total investment proposed for the 60 cities selected has now gone up to Rs 144,742 crore. Several of these cities are now readying DPRs; RFPs for some projects have already been readied and launched by Pune, Jaipur, Ahmedabad, etc. Another Rs 45,935 crore has been approved by the Ministry of Urban Development under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). In addition to 68 projects launched in 14 smart cities this June, another 134 projects have been identified, of which 114 are under bidding. The pace of urban renewal has been stepped up under these initiatives and is likely to accelerate in the coming year.

Growth has been initiated by eliminating bottlenecks and making structural changes. Liquidity released through the Pay Commission, OROP and government spending will add to the buoyancy likely to emerge as a result of the above normal monsoon, which will hopefully provide a bountiful harvest in the coming season. Obstacles are being eased with the initiatives enumerated above and the scenario is set for a revival. It indeed augurs well for the festive season ahead  Happy Diwali!

Unclogging legal and land blocks

NITI Aayog is finally fixing the loose ends with the construction matrix to allow the multiplier effect to breathe its magical effect across the economy. It is putting together a policy to remove hurdles for projects where contractors are locked in arbitration with government agencies so that 75 per cent of the funds would be released to banks in cases where there is unanimous award in favour of a contractor. This will help release funds and revive stalled projects. Close to Rs 3.6 lakh crore is locked up in such cases and banks will see their performance improve even if a part of the funds is released.

According to a survey by research agency Daksh, if one has a case pending in any of the subordinate courts in the country, the average time in which a decision is likely to be made is nearly six years. Even assuming that a case does not go to the Supreme Court, an average litigant who appeals to at least one higher court is likely to spend more than 10 years in court. Now, an underlying informal rule exists within the government department that is causing a huge bottleneck in judgements and awards. A large portion of the ´pending cases backlog´ originates from the fact that all judgements issued against government departments are appealed against, as a standard practice. This is so much of a hard rule that if a government officer does not follow suit, he fears that the Vigilance Commission may come after him. This not only delays justice, even in genuine cases, but clogs the judiciary system unnecessarily. Arbitration awards are also the victim of this informal ´standard rule´.

The new arbitration act has come into effect from October 23, 2015, which allows the awardee of the arbitration the fruits of the award after three months even though an application has been filed objecting to the award, unless the court issues a stay on the award. Considering almost Rs 3 lakh crore is stuck in disputes and arbitration (as per ASSOCHAM, it is closer to Rs 5 lakh crore; just consider that the amount stuck in arbitration and disputes with NHAI alone is Rs 23,000 crore), the new act may help resolve conflicts swiftly. But unless we arrest the root of the higher flow of arbitration cases, namely the ´standard rule´, we will be swimming against the tide.

Another factor strangulating growth is the escalating cost of land and delays caused in land acquisition. Data by the Ministry of Road Transport and Highways shows that during 2015-16, NHAI paid Rs 19,020 crore to acquire 9,285 hectare. This is the most it has paid out by way of compensation in one year compared to disbursements in the past five years. In the last fiscal, NDA paid an average of Rs 2 crore per hectare compared to Rs 1.35 crore per hectare in 2014-15.

Here, renting land for infrastructure projects is a viable and practical solution. It will help save capital by not requiring a large amount of money to be locked up and save time in purchase and the entire process of land acquisition, thereby fast-tracking projects. (According to recent estimates, the capex for land alone for road projects is Rs 185,000 crore.). Some industries already follow the model of leasing land instead of acquiring it. Oil and gas extraction and renewable energy projects usually follow the land-lease model. Land pooling used by Magarpatta city a decade ago and, more recently, by Andhra capital Amaravati, by CIDCO for the Navi Mumbai International Airport and by the Maharashtra Government for the Mumbai-Nagpur road corridor offer examples of how both delays and capex commitment can be lowered.

Indeed, it is time to unclog the arteries for the economic lifeblood to flow unfettered to make India vibrant and reach its growth goals.

And in this issue, understanding the growth goals across Tier-II and Tier-III cities, and consequently the growth in their building and design needs, the second decade and the 11th edition of the CW Architect and Builder Awards – CWAB 2.0 – introduced a whole new category of Noteworthy Projects. Through this category, we recognised the work being done across sectors – interiors, retail, commercial, residential, institutional and hospitality – and a whole new set of winners took centrestage with India´s Top Architects and Builders last month in Mumbai. These included winning projects from Anand, Surat, Calicut, etc.

And, as we pace up with the digital world, stay with us for daily news and updates on the magazine portal Let us also continue to be your single window to share your perspectives and voice your opinions and recommendations – and this time, its digital!

Step up contracts!

The industrial policy statement of July 24, 1991, set the notes on which the elephant learnt to dance. Manmohan Singh´s reform Budget scrapped industrial licensing and the requirement to get clearance from the Monopolies and Restrictive Trade Practices Commission for large companies to expand or start something new. This paved the way for foreign investment and foreign technology licensing. Opportunities opened for the private sector in many areas hitherto reserved for the public sector. India had to pledge 67 tonne of gold to Europe to get $600 million to tide over a dire import payments crisis.

Now, 25 years later, in 2016, India has become the world´s fastest-growing major economy. So while we have lost several years to ´policy paralysis´, global headwinds have once again, put the country in pole position. This is yet another opportunity to regain its pace by breaking shackles and leveraging the demographic dividend to move into superpower status.

As stated in this column earlier, projects commissioned reached a record high of Rs 4.6 lakh crore in FY2016 according to CMIE. This is the highest-ever commissioning of projects in a year and represents a 12 per cent increase over Rs 4 lakh crore in FY2015.The stock of projects on hand is also huge – total outstanding projects are worth Rs 159 lakh crore. Of these, Rs 92 lakh crore worth of projects are estimated to be under implementation. However, as per CMIE, a low addition to the stock of investment projects has contributed to a fall in the total outstanding projects from Rs 171 trillion at the beginning of the quarter to Rs 170 trillion at the end of the quarter of June 2016. This is the largest fall in outstanding investments during a quarter since June 2002. It is also the first fall since June 2014. The government needs to accelerate the conversion of project announcements to project tenders. The numbers of ´tenders issued´ and ´contracts awarded´ need to grow rapidly to create the momentum in the economy.

Union Minister of Roads Nitin Gadkari, who has already built up some momentum with acceleration in the roads sector, is also seeking FDI from the US and other Asian countries to explore business opportunities in India, including Bharatmala projects, projects under the TOT model, tunnel projects and intelligent transport systems (ITS). The National Investment and Infrastructure Fund (NIIF), with a mandate of Rs 40,000 crore, has identified the first eight projects it plans to invest in. These include the Konkan Railways project, a power transmission project in the north region, and a few road projects.

Still, India´s infrastructure spending is sub-par for the economic growth we aspire to. This is evident from the state of our airports, which have exhausted their capacities. The worst-hit airports are those in Mumbai, Delhi, Bengaluru, Hyderabad, Goa, Lucknow and Calicut. The Indian civil aviation market is growing at a rapid pace and now ranks ninth in the world. It is estimated that by 2020, India will be the third largest civil aviation market. To cater to this sector, which is growing at a pace of over 20 per cent, a much larger supporting aviation infrastructure is required than the proposed plan to invest $5 billion can address.

Although the monsoon has done its part to provide adequate rainfall this season, the roads in Mumbai have caved under yet again. It is shameful that six contractors – KR Construction, J Kumar, RPS Infraprojects, RK Madhani, Mahavir Infraprojects and Relcon Infraprojects – have been named in an FIR filed by the state government as perpetrators of a scam. This brings shame to the contracting community as the public paints all contractors with the same brush. Contracting associations must have stringent rules that uphold the dignity of the profession and should debar those that bring disgrace.

If India has to build infrastructure worth $1 trillion, it will spend $200 billion on construction.

Let us earn our keep with some dignity.

Waiting for ´Udta´ India

On June 25, exactly a year after the Smart Cities Mission was launched, Prime Minister Narendra Modi launched 84 projects from 20 selected cities that collectively aggregate to Rs 2,000 crore. Standing on stage along with the Union Minister of Urban Development, the Chief Minister of Maharashtra, and the Union Minister for Environment, with the Chief Ministers of Andhra Pradesh, Rajasthan and Odisha on video conference, he lauded the efforts of the winning cities and thanked the citizens of these cities for their participation in the challenge that led to the selection of the cities. The PM has not just launched several schemes for the long-term development of the nation but ensured that they are on track by reviewing operations periodically. His reviews send a shiver down the spine of the ministers as he looks for progress with an eagle eye and has the memory of an elephant!

´Brexit´ has heightened the volatility of global business even while our PM has enhanced India´s engagement with global leaders such that our voice is heard over several others. The Indian economy is on the mend as stated in this column and in our previous issues; even the economic indicators are turning positive. India needs to create a million jobs while it is just managing to provide for half that figure. FDI in 2015-16 has been a record $63 billion and now nine more sectors have been opened to additional liberalisation, with up to 100 per cent under automatic route, like defence, pharma, cable networks, mobile phones, airport, air transport, broadcast carriage services, and so on. Terms have been eased for food processing and retail. This is the second major overhaul of FDI rules in seven months.

In November, the government eased norms in 15 sectors. A Rs 6,000-crore package has been passed for the textile sector, aimed at generating 10 million jobs over the next three years and improving the sector´s global competitiveness. All these measures are aimed at creation of employment opportunities and to cope with the gap in providing opportunities for our country´s youth.

India needs to fill the huge infrastructure gap, which requires over $1.5 trillion in the next 10 years. Acceleration in construction of road projects has yielded twin benefits: Injection of immediate liquidity into construction projects and the benefit of the multiplier effect caused by acceleration of trade owing to connectivity between cities, towns and villages. This is being stepped up with a target of 10,000 km for 2016-17.

Further, NHAI has prepared a grid of 27 horizontal and vertical national highway corridors at a distance of every 250 km crisscrossing the country. All these stretches will be of four lanes. The total length of these corridors, including ones such as Kanyakumari to Srinagar, Porbandar to Kolkata, Surat to Paradip Port, Rameswaram to Dehradun, and Mangalore Port to Chennai Port, is about 36,600 km. Out of this, about 30,100 km are already national highways but only 18,800 km of them are four lanes. The proposed NH grid shall not only improve connectivity in each region and state capital but provide a highway link to 12 major ports, 45 out of 53 million-plus cities and 26 state capitals besides providing connectivity to major tourist and religious places. The recently announced aviation policy also plans to increase the number of airports as part of the ´Regional Connectivity Scheme´ servicing commercial flights from the current 77 to 127 by 2019.

Our institutional capacity needs to keep pace with our aspirations. And if our courts, which are already groaning under the pressure of pending cases, now have to intervene in censorship of movies, like in the Udta Punjab case, then it is a blatant abuse of strained capacity. Only if we hold institutions like ISRO, which recently earned millions of dollars by becoming only the third nation after Russia and the USA to launch the largest number of satellites in one rocket launch, as an example, will our soaring dreams fructify.