We are getting there

NITI Aayog has put forth a plan to turn India’s economy to reach a size of $7.5 trillion, (though targeting $10 trillion) or more than three times of what it is today, at $2 trillion. Implementation of GST, tax reform and ease of doing business (read the Cover Story) are all parts of the building blocks of this plan. And, they all seem to be moving on course so far. India is on the throes of a massive change. The change is not only limited to economy and industry but is also being instituted in social behaviour, and most importantly, in changing mindsets. Just look at what all is happening: Swachh Bharat, Digital India, Smart Cities, AMRUT, Affordable Housing, E-governance, E-Procurement, Make in India, Direct Benefit Transfer, Demonetisation, black money campaign, renewable energy thrust, UDAN, etc, and other social campaigns such as the Ujwala Yojna, Beti Bachao Beti Padhao and so on. This is a lot of work in so short a time and work is in progress.

The recently announced affordable housing scheme and Pradhan Mantri Awas Yojana or PMAY have seen the launch of over 350 projects to build about 2 lakh houses with a private sector commitment of investing Rs 38,000 crore. The cost of constructing these units will be in the range of Rs 15 lakh to Rs 30 lakh with an average construction cost of Rs 18 lakh per house.

Under PMAY-U, central assistance is provided to each beneficiary in the range of Rs 1 lakh to Rs 2.35 lakh. Of the 2 lakh houses, over 1 lakh will be constructed in Maharashtra, followed by 41,921 houses in the NCR; 28,465 in Gujarat; 7,037 in Karnataka; and 6,055 in Uttar Pradesh; among others. Cement prices have already reached pre-demonetisation levels on the back of demand coming from infrastructure and will firm further due to these housing projects.

GST is on track and is likely to cause another disruption for a quarter, but will soon bring great prosperity. Distressed assets of around $6.8 trillion sitting on books of the banks would also heave a sigh of relief as firms and funds like KKR, Lone Star, Kotak and Edelweiss are planning to mobilise their resurrection. It is estimated by experts that the capital required for the next four to five years to resolve distressed situations is about Rs 30,000 crore to Rs 40,000 crore, and it is already being provided for by NBFCs, PEs and international funds.

The PM completes three years on May 26 this month and a lot is on his plate. Fortunately, for us, his plans have accorded priority to infrastructure and while public spending is leading the way, the private sector is preparing to jump in the fray too. Recently, at a private charity function, I bumped into Sajjan Jindal, Chairman of JSW Group, and when I posed him a casual question on whether the private sector was ready to invest into the India story: “We are getting there,” he quipped.

Smart cities: Designed for growth

June 25 will be remembered as a red-letter day in the history of urban India as three mission programmes with a huge spend were launched, all backed by India’s dynamic Prime Minister Narendra Modi: Smart Cities, AMRUT and ‘Housing for All’. The depth of these programmes can be gauged from the detailing in the guidelines and the extent of the detailed planning of the conduct of their launch. After the PM set the tone by defining a smart city as one ‘where the administration thinks two steps ahead of the needs of its citizens’, he urged the assembled urban development state ministers, mayors and municipal commissioners from across India to aspire to leave behind a legacy by which their contribution to building India’s model urban programmes would be recognised. Union Minister for Urban Development Venkaiah Naidu conducted the workshop for two full days where good work done by municipalities was presented and lauded and guidelines to the three missions were explained.
In four months, states will receive proposals from their cities that want to qualify as projects. The states will then choose from among the selected cities from the list, and propose them as their entry to the Smart Cities Mission. It is likely that by March 2016, 20 cities will qualify for funding under the mission. These cities will receive Rs 200 crore in the first year and Rs 100 crore during the next four years. The cities will have to observe certain criteria, which include proposals for retrofitting with 500 acre or redevelopment with 50 acre or greenfield with 250 acre plus a pan-city smart solution initiative that has received the support of citizen groups. Further, they need to ensure that 10 per cent of power is sourced from renewables in case of greenfield development or redevelopment; 80 per cent of the buildings have to be energy-efficient; and 15 per cent of total housing provided needs to fall under affordable housing. The Urban Local Bodies (ULBs) have to provide financial statements for the past two years and demonstrate improvements as per the Swachh Bharat Mission and revenue generations from citizens through provision of services. All this is bound to gear ULBs up for accountability and good governance. As all procurements will take place through e-procurement measures, corruption will be minimised.
The Smart Cities Mission along with AMRUT, Housing for All, Digital India, Swachh Bharat and HRIDAY will see a total spend of Rs 4 lakh crore over the next five years. All these missions are integrated and interrelated. The essential change in these schemes over the past has been that the Centre has passed down the responsibilities of city improvement to the state. Introducing a challenge has added an element of competition. Once the ‘smarter’ states win funding for their cities, private sector money a.k.a. builders will flow in, leaving some in the lurch. Once money starts taking sides, city leaders will compete. This opens up opportunities for PPP as nearly 50 per cent of the money for the cities will have to be generated by attracting the interest of private developers. The Housing for All’ scheme will accelerate ‘in-situ’ slum redevelopment projects as it offers an incentive of Rs 1 lakh per 30 sq m flat built to developers. Housing loans of up to Rs 6 lakh for a 15-year period at an interest rate of only 6.5 per cent is being issued to economically weaker segments of society to acquire a home.
The affordable housing segment is likely to continue to be the only beacon of light for the debt-ridden realty sector. On a similar note, the roads sector has been green lit and the PM is likely to trigger a wave in July. Government expenditure is slated to rise with a major bump in September to come from the additional amount of Rs 70,000 crore set aside for infrastructure. Last month, this column had wished away the dark clouds of despair (‘Bure din gaye’). By September, we are likely to see the first crack of dawn of ‘Acche din’!