Inefficiencies and delays in implementing projects during the Eleventh and Twelfth Five-Year plans may result in a gross domestic product (GDP) loss of $200 billion by 2016-17, said a top management consultancy firm in its report. This would imply a loss of 1.1 percentage points to India’s GDP growth rate.
The new report, “Building India: Accelerating Infrastructure Projects”, by the Infrastructure Practice of McKinsey & Company said the cause of GDP loss was spread across tendering, executing and achieving financial closure of projects.
During 2007-09, there has been 30 per cent shortfall in awarding projects in power generation, national highways, and major ports. The continued shortfall in awarding tenders of this magnitude could result in a $100-billion loss to GDP, said the report.
Delay and cost overruns in project execution could lead to a loss of another $80 billion. The constraints in capital availability could account for the remaining loss of $ 20 billion, the report added.
“The opportunity cost of such a GDP loss would be immense — equal to roughly $150 in per capita income; 30-35 million jobs, in infrastructure and other dependent sectors, such as steel and cement; 5-6 per cent reduction in the rate of unemployment and the missed opportunity of lifting close to 3-4 per cent of the population above the poverty line,” said Prashant Gupta, partner, McKinsey & Company, and co-leader of the Infrastructure Practice in India.