Friday, July 18, 2008

India's Infrastructure Nightmare

Came across an old acquaintance's blog today regarding India's infrastructure night mare.

[ quote ]

As of today the inflation in India stands at 11.4% (almost triple of that in January). Oil prices have gone up from USD 128 per barrel in May to USD 145 per barrel today (and India has oil subsidies still in place). Sensex is down 24% since then and 36% since January 2008 (with a lot of retail investors having lost most of their savings).


hus while we say that India needs USD 500bn over the next 5 years in infrastructure spend, I am not sure if that number holds any significance any more. The opportunity exists. However, it needs to be reassessed for quality and quantity. This new study will then define what the infrastructure opportunity is truly in India.


... we now have to acknowledge that the development we think should take five years can now actually take seven to ten years. This acknowledgment should be accompanied with the acceptance that there is a cost of raising capital and despite being a family owned business economy we need to part with some of the wealth closely held to our chests. Otherwise the gloom and doom will only deepen and the infrastructure deficit will be ours forever.

[ /quote ]

Presented below is my thesis on why ramping up on education (not just literacy) and population control is truly the key.

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The Indian Infrastructre Dream or Nightmare!

hi Tanushree, you have a very articulate blog here. I read one article and couldn't keep myself from reading others even as I formulated a few supporting and contrasting arguments.

The Indian infrastructure nightmare has been ages in the making. It is something that we have always felt growing up, but never could realize how wrong things were till we saw an alternative. While much has changed in the past 61 years, much of the population is still devoid of the alternative perspective.

It is ironic, yet almost predictable by the tenets of economics, that our impecunious, yet English educated, burgeoning masses are the true drivers of the breakneck growth we have seen the past few years. The problems we face today are not new, and I believe are going to worsen irrespective of the financial market conditions.

The lack of infrastructure is understandable for a fledgling nation trying to recover from centuries of pillaging. It is also understandable and readily expected that such a situation leads to a minimalist thinking and a distinctly subsistence policy.

As Adam Smith had observed nearly 200 years ago, lack of education fueled a population growth. Subsequent improvements in basic health care prolonged the life-spans of an prolific population. Lack of commerce, depleted reserves, rampant mismanagement of available resources and consequent dearth of jobs exacerbated the vicious cycle of penury of the proletariat.

In return for its plundered wealth and ravaged humanity, India inherited at its inception an administrative model designed to gum the works and prevent efficient private enterprises from germinating and thriving. Our founders chose (perhaps through benevolent ignorance) to focus on agrarian accumulation and political solidarity rather than revamping an opportunistic civil service. We enthusiastically and euphorically replaced foreign despots with home grown tyrants.

Despite its numerous and flagrant faults, the initial Indian leadership must be credited for its vision of literacy. It is again ironic , yet in hindsight predictable, that our nation chose to unite itself under a foreign language whilst the native tongues served only to divide. It is the English based education that enabled a diaspora to prosper in foreign lands and bring back prosperity back to its ancestral shores.

Indian infrastructure has remained inadequate despite inevitable incremental improvements because the population has geometrically outpaced the quasi-linear development of infrastructure.

In today's India, the promotion of a tiny percentage of the population to middle class has served to spread euphoria and fillip an already exploding population. I believe this is the real challenge that faces us today.

The solutions to India's infrastructure problem are unfortunately inherently slow. No amount of external cash infusion and knee-jerk infrastructure development will help unless we dampen the exponential augmentation of our teeming billions.

Education, not merely literacy, is the key. We must concentrate on educating ourselves about the effects of our numbers on our resources and quality of life. We must educate ourselves about the benefits of well managed deregulation and the positives of a vibrant free market economy. Only the Invisible Hand of commerce and the voice of an educated, engaged populace will realize Milton Friedman's democratic, progressive society.

Short of this, I see an ineluctable resource crunch leading to vehement and violent strife within and without our borders. This too will serve to bring the population in balance with the extant infrastructure, but the consequent cost in human and fiscal terms is neither easy to imagine, nor morally conscionable.
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