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The highway to nowhere

How can a fiscal boost kick in when no new highway projects have been awarded between July and December this year?

india Updated: Dec 15, 2008 22:31 IST
Hindustan Times

The magic bullet to India’s growth story that has begun to seriously flag is a bold counter-cyclical fiscal boost by the government. A step-up of public investment in building national highways, seaports, airports, power and other infrastructure will generate employment and bolster aggregate demand. Unfortunately, just when this boost has become imperative, there are disturbing reports that even the list of infrastructure projects that can be so funded have not yet been finalised. Around 234 out of 515 central projects, for instance, suffer from severe delays. A bare 2 per cent of these projects were ahead of schedule and there have been overruns of 10.6 per cent.

How can a fiscal boost kick in when no new highway projects have been awarded between July and December this year? As many as two-thirds of the highway projects awarded by the National Highways Authority of India, the highways regulator, have not achieved financial closure. A majority of the 17-odd road works awarded under public-private partnership as part of phase 1 of the National Highways Development Programme (NHDP) has been delayed, according to a recent report of the Comptroller and Auditor General of India. The most damning report of all is that the UPA government has also failed to finish any of the highway projects that it had started in 2004 and that were slated for completion in 2008. An internal review indicated that none of the 47 projects was finished in the second phase of the North-South-East–West Corridor, that is an important part of the NHDP that envisages four-laning 32,399 km of highways across the country.

With such a track record, the government’s efforts to step up public investment can come a cropper. For starters, there is a need to address the various procedural constraints – like land acquisition and escalation of input costs — that stand in the way of the government’s efforts to kickstart investments in highways. It must also spend much more than the paltry Rs 34,000 crore or 0.6 per cent of GDP at market prices it recently announced. If the uppermost need is to salvage the growth story, the requirement is for five times that amount to restore just one percentage point of GDP growth. There is no alternative but to divert resources for this purpose of reflating the economy. To save 2.5 million jobs by 2011, Barack Obama, the President-elect of the US, is mulling a $1 trillion stimulus plan. Is the government listening?

First Published: Dec 15, 2008 22:27 IST