India has become the fifth largest economy in the world; however, its per capita income in purchasing power parity terms is still half of the world’s average, demonstrating the extent and need for a financial catch-up. Infrastructure spending is necessary for boosting the Indian economy, given its 2.5-3x multiplier effect on GDP, thereby increasing employment and income generation opportunities and further increasing domestic demand.

The capex expenditure has more than doubled since FY15. Realising the infrastructure-backed growth, the government announced the National Infrastructure Plan and the National Monetization Plan. The Gati Shakti plan, announced in October 2021, complements the same which through an integrated national platform would bring together under one umbrella various official departments such as roads and highways, railways, ports, and coal and enable coordination for project planning, development and execution. Each of these ministries will have access to the updates of existing as well as proposed projects enabling harmonised development.

Gati Shakti would help identify infrastructural gaps in various projects spanning over various ministries and enable fast track resolution. It will break silos across various government functionaries and enable holistic and synchronised planning and execution of projects. Thorough planning and coordinated execution will enable optimisation and thereby reduce time and cost overruns, leading to fast tracking of infrastructure projects.

Need For the Plan

While the focus on infrastructure development has been seen over the past two decades, it was marred by the lack of coordination among various departments, absence of standardised operating procedures, departmentalised planning and approvals, lack of last-mile connectivity leading to construction delays, cost overruns, significant change scopes and sub-optimal resource utilisation.

Earlier, infrastructure projects were planned by respective state/central agencies and their departments while many times needing approvals from other ministries and departments. Project delays on account of delays in approvals from various departments has been more of a norm than an exception. Lack of a coordinated approach by various ministries and departments, which work for their own targets and goals, led to duplicity of work.

Gati Shakti - National Master Plan

Gati Shakti provides an integrated digital platform which will bring all necessary ministries and departments together for holistic planning and implementation of infrastructure connectivity projects. The platform will have all the economic zones and their multimodal connectivity infrastructure, enabling last mile connectivity. It will bring together a number of ministries/departments (currently 23) developing and executing a single plan, thereby ensuring minimal duplication, enhanced coordination, faster execution, timely completion and seamless connectivity.

The plan integrates marque government schemes such as Bharatmala, Sagarmala, UDAN, inland waterways, and covers the economic zones to make Indian businesses more competitive. The goal is to bring together all key stakeholders including government departments and employ modern technologies by using a geographic information system GIS-enabled digital platform. It would also allow tracking and aligning of their projects with ongoing inter-related projects implemented by other agencies.

Gati Shakti Governance Framework

The institutional framework for rolling out, implementation, monitoring and support mechanism is designed to have a three-tier system.

The EGoS will monitor and approve any changes in the plan; the NPG will examine and sanction existing and future projects in accordance to the plan while ensuring integration, reducing cost, avoiding duplication and enhancing optimisation. NPG would be responsible for coordination between various ministries/departments and facilitate regular interactions with stakeholders.

State Governments to Play a Critical Role

Gati Shakti’s success significantly hinges on the integration of state governments with the National Master Plan. Project implementation significantly pivots on the dealings with state and local departments within the state. It is often observed that delays in project implementation is on account of multiple approval requirements, leading to cascading impact on project cost and time overruns. Bringing the central departments, state departments, various departments within the state becomes critical for achieving for effective achievement of the plan.

Conclusion

India’s logistic cost as a percentage of GDP of 13 per cent is higher than world average of 10.8 per cent and far higher than some of the developed economies having around 8.5 per cent. The government’s focus on infrastructure development as recognised under the National Infrastructure Pipeline is positive; the Gati Shakti plan would enable streamlining and thereby efficiently making these investments. Successful implementation of the plan will transform the infrastructure sector and holistically integrate all the multimodal connectivity projects, remove missing gaps for seamless movement of people, goods & services, reduce logistics cost and act as a catalyst to further economic growth.

By: Vishal Kotecha, Director & Head - Infrastructure and Project Finance, Fitch Group