India reveals $500B+ infrastructure spending spree plan

India will be spending $500 billion (over Rs37 trillion) a year by 2030 to accommodate its rapidly-expanding population, according to a new study.

International construction and consultancy company Mace said that by end of the first quarter of fiscal 2021 (April-June 2020), there were 1,698 central projects under implementation across India. These include 469 mega projects, each costing Rs10 billion and above, and 1,229 major projects, each costing Rs1.5 billion to Rs10 billion.

Of these, 414 projects are suffering from cost overruns of ₹4,337.62 billion, which is 66.71 per cent of their sanctioned cost.

In April, India enhanced its infrastructure investment target for the next five years, increasing the figure to Rs111 trillion from its initial projection of Rs102 trillion in December last year. The private sector’s share in this spending is at 21 per cent while the share of state governments is at 40 per cent, with the remaining 39 per cent coming from the centre.

According to the Economic Survey, India needs to spend as much as $4.5 trillion to boost its creaky infrastructure by 2040 but will grapple with an investment gap of $526 billion in the next two decades.

Mace’s report, A Blueprint for Modern Infrastructure Delivery, said up to 80 per cent of large infrastructure schemes are delivered late and over budget, and then under-deliver on benefits.

“These challenges must be addressed so as not to undermine the global infrastructure-led economic recovery; evidence of change through successful delivery is essential to boosting public confidence in the months ahead,” said the report.

“Construction halt, labour shortage and revocation of toll collection were some of the major challenges India’s infrastructure sector has faced due to the lockdown since March,” said Anuj Puri, chairman of Anarock Group.

The government’s focus has shifted primarily towards building healthcare infrastructure to accommodate the pandemic’s fallout. Even now, after a staggered easing of lockdown rules over the last months, major infrastructure work across the country haven’t resumed usual pace, he said.

“In India, there is a very real need to ensure timely implementation. Many of India’s infrastructure projects were already delayed even before the pandemic.”

Jason Millett, CEO for consultancy at Mace, said in India not all infrastructure projects are properly planned and delivered, resulting in delays, cost overruns and under-delivery against expected benefits.

“The negative impact of this is significant, with our calculations showing that, in India, this could result in an additional cost of Rs10.820 trillion by 2030. Globally, the cost could be as much as $900 billion. This financial burden, combined with a perceived lack of delivery capability due to project delays and mismanagement, risks severely damaging public confidence in the sector; something we cannot afford when community buy-in is so critical to establishing and achieving positive outcomes,” said Millett.

Since the global Covid-19 pandemic took hold at the start of 2020, infrastructure delivery and its role in society has changed dramatically in nature. For instance, at its peak, the pandemic caused a 73 per cent drop in public transport use in India.

According to the World Bank, the impact of lockdown measures and behavioural changes in response to Covid-19 caused the most severe global contraction since the World War II.

Economies around the world are hit hard by the impacts of the virus, and many governments have positioned infrastructure deployment as a core part of the remedy.

— issacjohn@khaleejtimes.com

• India