Last week, the government relaunched the Bharatmala Pariyojana (BMP)—an initiative to add 35,000km of new highways (subsuming existing plans to add 10,000km of national highways) with an outlay of Rs5.35 trillion over the next five years—to raise investments in infrastructure, and boost economic growth. An additional Rs1.57 trillion is set to be used in existing projects. Thus, overall the Union government is set to spend around Rs6.92 trillion on roads over the next five years.
The road-building initiative was sorely needed but it does not represent acceleration in road-building, and is unlikely to provide a big boost to the capital expenditure cycle.
According to data from the Centre for Monitoring Indian Economy (CMIE), newly started road projects in the last five years (i.e., between 2012-13 and 2016-17) amounted to Rs6.55 trillion. Of this, Rs4.35 trillion was spent by the centre, which tends to focus mainly on national highways, with other roads being under the jurisdiction of states. Hence, the outlay on highways envisaged over the next five years, i.e. Rs6.92 trillion, does not appear to be a big jump, especially after accounting for inflation.
Even when viewed in terms of road length, the proposals do not amount to a significant increase. The central government aims to build around 35,000km of new highways over the next five years; 24,800km under Bharatmala, and the rest under the existing NHDP program. This is not too ambitious a target given that around 27,000km of national highways were added in the last five years.
On top of that, the risk that even this not-so-ambitious target will be missed remains, given that actual road construction has typically been behind target.
As a note by UBS Securities India Pvt. Ltd pointed out, highway award activity stagnated in the last fiscal year, and the Bharatmala initiative does not change that.
“The government’s new Bharatmala programme doesn’t change that picture (of stagnation) – it was needed because existing program awards were ending,” a team of UBS analysts wrote in the recently published note.
While the initiative will lead to new awards of road contracts, it will still be a small fraction of the investments the Indian economy needs over the next five years even if the government happens to beat its past record, and meet all targets. To illustrate, the entire proposed spending on highways over the next five years—Rs6.92 trillion—only amounts to 17% of overall investment spending (gross fixed capital formation or GFCF) in the single year 2016-17. Even after adding the proposed Rs88,185 crore spending on rural roads in the next three years, the total capex plans of the road sector in coming years amounts to Rs7.8 trillion or only 19% of GFCF in 2016-17.
While it is true that investments in roads now constitute a big part of infrastructure-related capital expenditure, the trend actually reflects subdued capex activity by private firms.
Analysis of CMIE data showed that while public spending on infra projects has indeed risen over the past couple of years, overall growth in infra spending still remains muted largely because of lack of infra investments by the private sector owing to legacy problems. The boom years of high private participation in the 2000s were followed by a spike in stressed assets, leading to a pile-up of bad debt and lowered lending to the sector.
The government’s other big plan announced last week—recapitalization of state-owned banks—may partly ease such constraints in the years ahead, if it is implemented well. However, it is worth keeping in mind that funding constraints are not the only hurdles infra projects face.
Many such projects are stuck because of lack of clearances even as the extent of projects stuck because of land acquisition problems seems to have declined.
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- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
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- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
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In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)