9. Improve infrastructure

India's constraints in infrastructure are obvious. The problems of clogged airports, poor roads, inadequate power, delays in ports have been well-recognised as impeding growth. Indian companies on average lose 30 days in obtaining an electricity connection, 15 days in clearing exports through customs, and lose 7% of the value of their sales due to power outages.

Incremental demand for infrastructure will continue to increase due to economic growth and urbanisation.

The problem

• Financing. The Planning Commission estimates that India needs an additional $500 billion over the next five years itself to finance infrastructure. A large percentage of that will have to come from the government. But government finances are not in good shape, which does not augur well.
• Institutional constraints. There are capacity constraints in managing and executing infrastructure, especially at the state level.
• Regulatory issues. Till very recently, the government dominated the infrastructure space, and private investment was negligible. There are may areas of infrastructure that are not open to private investment. There are significant barriers to entry for firms, especially foreign firms, and FDI limits are still in place.

Elements of reform

• To help resolve financing issues, India needs to develop its capital markets.
• To encourage greater private-sector participation, the regulatory constraints need to be removed.
• The success stories in the past few years need to be replicated. India has built more than 3,600 miles of highways for the Golden Quadrilateral Highway project, whereas in the previous 50 years it had built 300 miles; the New Delhi metro was completed earlier than envisaged; and the privatisation of the telecom sector, and its rapid growth and penetration, are all success stories that demonstrate that India can build infrastructure. The ability to continue to do so will be critical for the growth of the economy.