<b>Vinayak Chatterjee:</b> Getting infrastructure moving again

Two short-term strategies and one medium-term should get the sector buzzing

The simple economic construct is that a 9 per cent growth aspiration consists of 4.5 per cent consumption-driven growth and 4.5 per cent investment-led growth. Of the investment portion, about 60 per cent consists of infrastructure. Turbocharging infrastructure investments would thus impact gross domestic product by about 3 per cent.

How is this to be done?

Three strategies are in order - two short-term, and one medium-term. The short-term ones are "public expenditure-led infra investments" and "revival of stalled projects." The medium-term is "restoring PPPs" (public-private partnerships).

Public expenditure-led infrastructure investments
In the current situation, it is virtually a Hobson's choice; or what political pundits like to call the TINA factor - "there is no alternative". Chief Economic Advisor Arvind Subramanian rightfully advocates this in the Mid-Year Economic Analysis 2014-15, where on page 15 it states: "In this context, it seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment, but to revive and complement it."

The fly in the ointment here is the concern that this strategy would negatively impact the fiscal deficit. With the finance minister struggling valiantly to contain it, and attempting to strike a middle path between the fiscal conservatives and the expansionists, the real challenge is to look for sources of funding beyond the Consolidated Fund of India to drive this strategy. This is where India's public finance specialists should come forward and draw up a practical action-agenda for tapping "off-budget" funding options. Surprisingly, the choices are many - bilateral and multilateral funding, state governments' own fiscal space, tax-free infrastructure bonds from the market, dedicated funds with the support of sovereign wealth funds, cash-rich public sector undertakings (PSUs) et al. Incidentally, central PSUs are reportedly sitting on a cash pile of Rs 2 lakh crore, which with a 3:1 debt-equity ratio can fund Rs 8 lakh crore worth of projects.

Many of the choices are amenable to monetising the tsunami of goodwill created by Prime Minister Narendra Modi with his personal rapport with world leaders in east and west. One of the first tasks for the fledgling National Institution for Transforming India (NITI) Aayog could be to draw up a creative resource-raising plan that does not strain the fiscal deficit. Such a strategy, to be effective, also requires identifying iconic, dynamic and empowered PSU chiefs to drive it. Many names from the '60s to the '80s era come to mind, of top-notch bureaucrats, who gave the nation the Navaratna PSUs we are proud of today.

Revival of stalled projects
The second short-term strategy is a no-brainer. It is about aggressively resurrecting the phalanx of "stalled projects". The broad take here is that out of the initial stock of Rs 25 lakh crore of stalled projects, apparently projects worth Rs 7 lakh crore have revived, leaving now a stock of Rs 18 lakh crore still log-jammed. Of this, Rs 11 lakh crore is infrastructure projects. Having gasped at the enormity of the problem rather late in the day, the United Progressive Alliance did indeed pump in a dose of political and bureaucratic adrenaline by activating the Cabinet Committee on Investments, supported by the Project Management Group (PMG). Somehow, that specific level of energy and activity is not publicly discernible now.

Three suggestions are in order here; first, it may be a good idea to anchor the PMG in the Prime Minister's Office; second, staff it with cutting-edge leadership; third, present a fortnightly report card on the projects that have been revived.

Restoring PPPs
Finally, the medium-term strategy is unquestionably to get PPPs sizzling again. To achieve this, it is important to pause after the decade-and-a-half experience with PPPs and craft a far more robust model based on all we have learned - encapsulated in this "5R" checklist:

• Risk allocation (has to be more equitable between sovereign and private sector);
   
• Renegotiation (has to be accepted as a part and parcel of the long PPP journey - handled transparently);
   
• Regulation (has to create level-playing field conditions with independent sector regulators);
   
• Resourcing (has to reduce dependence on commercial banks by creating non-bank long-term alternatives);
   
• Rapid-ising (has to enable quicker implementation by removing hurdles such as land acquisition/environment, and fostering seamless inter-ministerial, and Centre-state co-ordination).

These are a formidable array of tasks, which is the reason it is a "medium-term strategy". The importance of doing this has been well recognised by the finance minister. In his maiden Budget, he allocated Rs 500 crore for an institution called "3P India", whose mandate should be to address these issues.

Now, with all the political, bureaucratic and intellectual capital under the government's command, could we get along with implementing these three strategies vigorously and enthusiastically?

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The writer is the Chairman of Feedback Infra vinayak.chatterjee@feedbackinfra.com;
Twitter: @Infra_VinayakCh