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Infra puts a spanner in Make in India

Poor infrastructure is preventing India from being a cost-efficient manufacturing hub and from replacing China where labour costs are rising, points out Economic Survey for 2016-17.

“On logistics, India is handicapped relative to competitors in a number of ways. The costs and time involved in getting goods from factory to destination are greater than those for other countries,” the survey says in the chapter that focuses on strategy needed to become an alternative destination as China is gradually vacating its dominant position in labour-intensive sectors, affording India an opportunity.

But that space is being filled by other countries like Vietnam and Bangladesh, and not India, it says.

Further, few very large capacity containers (VLCC) come to Indian ports to take cargo so that exports have to be trans-shipped through Colombo, which adds to travel costs, and hence, reduces the flexibility for manufacturers.

India also needs to invest heavily in its urban infrastructure which bursting at the seams, requiring significant investments of close to Rs 60 lakh crore over the next 20 years to bridge the infrastructure deficit.

While a part of that fund can come from the Centre, there is an urgent need to boost revenue generation by urban local bodies, the survey points out.

“Addressing this infrastructure deficit will require resources, some of which could come from the Centre and the states. The Fourteenth Finance Commission has recommended a grant of around Rs 87,000 crore to the municipalities for the period 2015-20, constituting assistance of around $500 per capita per annum on average. The rest of the required funds would have to come from local resources. But raising sufficient resources has not proved easy,” the survey says.

For the municipal bodies to generate resources and fund infrastructure, they need to be empowered. “Municipalities that have generated more resources have been able to deliver more basic services. The states should, therefore, empower cities to levy all feasible taxes. Municipalities also need to make the most of their existing tax bases. State governments needing to cede power and sharing resources — are daunting,” the survey recommends.

According to the high powered expert committee appointed by urban development ministry, about Rs 39 lakh crore was required for the creation of urban infrastructure over the next 20 years.

Out of this total, about Rs 17 lakh crore was needed for roads and Rs 8 lakh crore for services such as water supply, sewerage.