India’s Golden Quadrilateral (2)
Posted : December 5, 2005 at 4:26 pm [America/Los_Angeles]
Highway spending will likely be a key component of India’s goal of sustained annual GDP growth of 8% over the next decade. We believe the lack of infrastructure spending has been one of the most important factors that has kept India from fully competing in fast integrating global economy, particularly against China.
…China’s expressway network is almost 30,000 kms versus less than 2,000 kms in India.
…Most of India’s highway network is two-laned, with low service and slow speeds. Average speed on these roads is typically less than 50 km/hour, except for a few quality stretches. Of the total 65,000 kms of national highways, only 9% are four lanes, 56% are two lanes, and 35% are single lane. India spends only US$2.5–3.0 billion/year on development of roads compared with an average of US$25 billion/year in China since the mid-1990s.
…In 2000, the central government initiated the National Highway Development Program (NHDP), in an effort to improve highway infrastructure. While the NHDP initially targeted about 13,000 km of arterial highway network, the government has extended the plan to include all 65,000 kms of national highways. Total cost of this program is likely to be Rs1,720 billion (US$38 billion) and is scheduled for completion in 2012.
…Despite the increase in NHDP funding, annual highway construction spending remains minuscule as percentage of GDP. The first two phases of the NHDP involve US$14.8 billion in spending spread over an 8-year period, implying annual spending of US$1.8 billion. Average highway spending in China is US$25 billion since the mid-1990s.
…A large part of the funding for roads/highways will have to come from the government, in our view. We believe the government must find innovative ways to raise the necessary funds apart from the obvious but difficult solution of cutting back what some may view as wasteful revenue expenditures. Considering the practical limitations, such as the current large revenue deficit, lack of determination on the part of the government to augment resources through large PSE divestments, and weak institutional capacity to manage infrastructure projects efficiently, we believe that the pace of road development, though improving, is unlikely to be dramatic in the medium term.
— Morgan Stanley, “Huge Gap in Road Infrastructure”
I can only hope and pray that the Indian government steps up to this challenge. They should. They M-U-S-T.
- Anand
Category: Chindia