Will Modi-Gadkari’s Rs. 10 Trillion Bet On Infrastructure Lead To Amritkaal?

All eyes are on India. Being the fastest growing major economy in the world, the $3.5 Trillion Indian Economy is expected to scale greater heights and join the league of developed nations by 2030. Indeed, the question now is not if, but, when will India reach the $5 Trillion Economy mark. It is in this context that the Modi sarkar’s Rs. 10 Trillion (A Trillion is One Lakh Crores) on Infrastructure leading to Amritkaal (golden age) can become the much needed game changer for catalyzing a Manufacturing Renaissance.

So, is Rs. 10 Trillion enough to build roads, ports, airports, rail lines, dedicated freight corridors, and sundry aspects of what is commonly categorized as Infrastructure? Or, does the Indian Economy need more investment into its “shabby” Hardware? Leaving aside the question of where the money will come from for the moment, the Elephant in the room is, whether this “big bet” pay off in the next decade or so, when the Indian Economy is expected to “arrive” on the world stage?

For long, India has often fallen short on the expectations versus actual performance front, as is familiar to anyone old enough to remember the periodic “expert” verdicts on the imminent “resurgence” only to be met with the “debris” (literally as well as figuratively) of broken promises. Indeed, being a 90s kid, I was as enthusiastic about the opening up of the Indian Economy that decade as anyone else, and the Western press was full of “India’s moment” having come. However, more than three decades later, we are still “emerging” and so, it is natural to take the latest gushing with a liberal dose of salt.

Of course, we are reminded by Modi and his minions that this is “it” and Amritkaal has started. So, maybe, one should be sanguine this time around as much as the Economist Magazine, which had a cover story on this decade being “Modi’s to lose”. Indeed, going by press reports, anecdotal talk, and personal experience, I do believe that irrespective of whether we reach Amritkaal, we are literally physically reaching on time, with all the roads and airports really making a difference. So, Gadkari has a point here.

It is received wisdom that no nation can become fully developed unless it has the “hardware” or the physical Infrastructure in place. This is because a developed manufacturing sector needs roads and dedicated freight rail corridors to move raw materials, components, and goods from place to place. It also needs ports from where exports to foreign countries can happen, as well as receive imports. The manufacturers also need airports for individual and organization travel needs, in addition to facilitating visits by their partners from both abroad as well as within the country.

When all the above are done seamlessly and with frictionless movement, the resulting speed and the scale would automatically increase the profits, and minimize losses on account of shabby infrastructure. Added to this is the “quantum jump” that the GST or the Goods and Services Tax has achieved for manufacturers, and one can very well see the “transformation” happening here. However, the Rs. 10 Trillion question is: will this mega thrust on Infrastructure pay off the way it is being spun?

The answer is that Infrastructure is just one piece of the puzzle ( albeit a major piece) and it needs concomitant policy initiatives, supply of skilled and more importantly, employable labor pool, adequate health systems, and the willingness of both domestic and global capital to invest, and again importantly, sustain their investments until they begin to pay off and beyond. While the Modi government is making the “right” moves here, there are any number of ways in which they can go “wrong”.

Let me explain why. Despite the hype, the Make In India and the Atmanirbhar policies have been a damp squib. Next, the PLI or the Production Linked Incentive scheme has somewhat succeeded, but, with the overall domestic industry still “hesitatant” to invest, this too is floundering. Agreed that Apple, under its China plus strategy, has setup an iPhone manufacturing unit. However, productivity and quality problems continue to drag the output down. Moreover, India and Modi’s (by extension and association) bet on the Adani group becoming a “national champion” in Infrastructure risk ending up as “international embrassment” given its recent “troubles”. Last, the most consequential challenge is tapping into the Indian Economy’s much vaunted Demographic Dividend, with employability issues along with chronic joblessness, in a contradictory “double whammy” of sorts, becoming a severe drag on the manufacturing sector. Just FYI, I’m not even talking about corruption, that can bog down the Ease of Business in a literal and metaphorical sense.

Having said that, we must make a start and I’m all for the Modi-Gadkari Duo’s Infra push. I also believe that we need to be patient and the results will materialize. More so, when poloitical stability looks assured, in addition to a broad bipartisan consensus (though they disagree on the nuts and bolts of it) on Infrastructure. Perhaps the most compelling argument for the Infra bet paying off, is the “unleashing” of the pent up entrepreneurial “energy” that has long clamored for this kind of “first world” Infrastructure. Remember that the post Second World War “boom” in both the United States as well as in Europe ( yes, include Japan as well) was on account of the “massive” building of highways and reconstruction of the destroyed manufacturing base. So, it is our turn now, and Amritkaal can become a reality.