Lap of Dishonour

By Sharon Stephenson

How many Indians does it take to build a stadium? And how many years? If New Delhi’s Jawaharlal Nehru Stadium is anything to go by, the answer to both is ‘far too many’.

Even then the infrastructure is unreliable: days before the 2010 Commonwealth Games were due to start in early October, a footbridge outside the multi-million dollar stadium collapsed, injuring 27 workers and giving the lie to the claim that the world's second most populous nation was ready to host a major international sporting event.

The problems that plagued the event read like a roll-call of misery: leaky pools, rogue snakes and claims that rooms at the athletes' village on the outskirts of the capital were "filthy and unfit for human habitation".

Add to this allegations of rampant corruption, an epidemic of dengue fever, terrorist threats and an unusually persistent monsoon rain that caused sections of the stadium roof to fall in, and it's easy to see why competing nations were reluctant to schlep halfway across the globe for the event. 

Yet it wasn't supposed to be like this. The largest global sporting event ever to be held in India, the 2010 Commonwealth Games hosted around 10,000 athletes from 71 nations and territories who competed in 17 disciplines over 12 days. It was India's chance to show off its new economic might and prove to the world that it was open for business, just as its neighbour China did when it hosted the 2008 Olympics. Indeed, speaker after speaker at Delhi's opening ceremony were at pains to announce that "India has arrived".

And despite the rocky start, India did manage to claw back some respectability and shrug off the title of 'Shame Games'. The country even recorded its best ever gold medal tally. According to V. Ravichandar, head of Bangalore-based multinational advisory firm Feedback Consulting, the games turned out better than worst feared. "The Games were really a metaphor for investment in India. It's not a smooth ride but things work out in the end."

Indeed, critics say the delays, corruption and poor quality work associated with the Games are endemic of the country's entire infrastructure sector. 

While building the Games Village, for example, officials ignored protests that the site was in an earthquake zone intersected by a monsoon-clogged river and beset by mosquito breeding grounds. Delhi also been called India's most corrupt city and has a reputation for badly constructed, leaky buildings as developers collude with authorities to cut corners and compromise on quality. In August 2010, for example, India's central Vigilance Commission (CVC) accused companies working on contracts linked to the event of inflating prices and poor quality work. The CVC cited examples of poor quality work, such as weaker than specified concrete and lack of anti-corrosion measures, and also implicated third party inspection agencies charged with verifying such issues.     

As Robinder Sachdev, President of the Delhi-based think tank Imagindia Institute says, testing India's ability to deliver infrastructure to a deadline was always going to be a risky proposition.

"The Commonwealth Games is a textbook example of how governance can go awry in India. The economy is booming and the population is increasingly affluent and urbanised, so the Games should have reflected this. Not being able to handle mega-projects let the side down in the eyes of the world," says Sachdev.    

Domestically, however, the litany of blunders may have served a useful purpose. "Indian society and the government have been served a kind of wake-up call. The open debate about inefficiencies and corruption has strengthened Indian democracy and jolted a wider consciousness in India that such ineptitude, nepotism and corruption should not be tolerated in the newly emerged India."

Indeed, in the wake of "vociferous public protests" the Indian government is now vigorously pursuing cases against various Commonwealth Games officials. "Going forward, chances have improved that such blatant mismanagement and corruption will not happen with future projects."

The sting in the tail is that the Games also failed to be the coming out-party that the 2008 Beijing Summer Olympics was for China. Forty years ago, India shared the same GDP as China, but it now trails an economy three times its size. So why is infrastructure lagging so far behind economic growth?  

It's partly a matter of timing, says Sachdev. "China started its reforms process in the early 1980s, while India only started down the reform path in the early 1990s."

And, of course, solutions that worked in China's autocratic society wouldn't work in India's more chaotic, open society. "A centralised decision and power making mechanism have helped Chinese leadership to develop infrastructure without being weighed down by extraneous factors. In India, any project has to go through a democratic process, including possible public protests and litigation. Such wide inputs in a loud and vibrant democracy like India's have often delayed projects - but at the same time have consistently strengthened Indian democracy.

If Sachdev was to indulge in a little crystal ball gazing, he'd say that India can - and will - develop the economic heft to match its Asian neighbour.

"In the next five-year plan (2012-2017), India will need about US$1 trillion investment in the infrastructure sectors, according to the Planning Commission of India. It is planned that out of this investment, about 50% would come from the private sector. It is expected the US$500 billion from the private sector would need to come from Indian and foreign private investors."  

Yet much must also be done in terms of getting the basics right, he adds. "It can take 10 days to transport a new car from its southern Indian factory to a car dealership in northern Punjab, because each state usually requires a raft of paperwork and bribes. To speed up infrastructure development, there are some policy issues that are needed right now, particularly around the matter of land acquisition for large projects. Additionally, various governmental agencies need to get smarter in terms of structuring public/private partnerships (PPP) since many infrastructure projects will be in the PPP mode. Thus, successful and efficient transport models of PPP need to become more widespread."

Meanwhile the government has been spending billions over the past few years under flagship schemes to rejuvenate its cities. Money is being spent on sewage and drainage systems, water and waster management, transportation systems and buses, road widening and initiatives aimed at cleaning up and providing basic amenities to the millions living in such targeted cities (over 80 or so).

Finance, although certainly a crucial ingredient in this equation, will be less of a concern in years to come since the Indian market can provide a ROI which is very attractive to any investor, predicts Sachdev. "In an era when the US and Europe are growing at hardly three-four percent, India is clicking over nine percent, and with a population of over a billion people. This means there is immense scale of opportunities in a market which needs everything today". Investment opportunities in the West are generally maturing, meaning capital can get much higher returns in the market of a rapidly expanding economy like India.

While the West is trying to pump up its innovation industries India, on other hand, is a vast test-bed for innovation since the country has to virtually create itself anew, and ensure that solutions reach the base of the economic pyramid. The low-cost Nano car (launched at around US$2500) is an example of the Indian market driving innovations. "India definitely needs to sell its story better to investors, but the concern here is communicating the right pitch to investors, rather than the availability of finance."

Indian businesses - particularly those not-so-large companies - need to take more risks and change their attitudes towards investment in resources, business development and human capital, suggests Sanchev. "While larger companies need to be more proactive in tying up resources in foreign markets for their operational needs in India, ranging from coal to metals and minerals."

One resource of particular importance is energy. With the civil nuclear cooperation with the US finalised, India has now emerged from the sanctions which were in force since 1974, and which prevented it from acquiring technology and uranium fuel from the world markets. India has ambitious plans to harness nuclear energy now. Presently generating less than 5,000megawatts, by 2032 the country plans to generate 63,000megawatts, and by 2050 a massive 470,000megawatts are targeted.

Such quantum jumps in an energy-hungry nation will, of course, have a direct impact on the country's GDP. However, the pace of capacity augmentation - via nuclear, thermal, renewables, etc - has to sharply increase, says Sanchev. "In the medium term - perhaps 10 years or so - India should be able to commercialise thorium-based nuclear power which would bring significant advantages to India. That may, in fact, create a paradigm shift - since India has over 30 percent of world reserves of thorium supplies and is already a world leader in thorium-based technologies. This would also have an indirect impact on the country's road infrastructure - extremely large turbines will need to be transported by road to the plant sites. Not many roads in the country can presently handle such heavy transportation!"

Education is also extremely important if Indian infrastructure is to keep pace with the economic juggernaut, says Sachdev. "India has a young population that is aspiring, energetic and would like to achieve a successful lifestyle. Yet, there are three aspects that need to be upgraded if infrastructure is to be improved. The first is the quality and skills of educated graduates, the second is the need for vocational training and skills for large workforces in the manufacturing sector, and the third is an increase in colleges and institutions of learning - by some estimates, India needs 500 new universities to provide education."

Sachdev admits it won't happen overnight but is confident that India can back up its claims "to have arrived" with effective and efficient infrastructure. "There is no way for India to go but up. We have always known of our poor infrastructure - and so have the savvy foreign investors. This is not news for them and us. The news is that there is now urgent attention to the infrastructure sector coupled with the runaway growth of the Indian economy. Realisation on behalf of the government, media, and wider public opinion that infrastructure must be developed rapidly, without corruption, and on project deadlines, will now see India's infrastructure changing the landscape of the country."

Foreign investors favour India

The sheer level of demand for physical and social infrastructure will ensure large levels of private investment continue to pour into India as it has been doing for the past 12 months.

India has attracted a record US$21.4 billion in foreign funds in stocks in 2010 - one-third of that since September. State-run Coal India is poised to launch a US$3.5 billion initial public offering (IPO), the country's largest, which is expected to see heavy investor demand.

It underscores how private industry in India is booming thanks to tens of millions of Indians aspiring to the middle class. Companies like Bharti Airtel are expanding to Africa and companies like Tata Motors have brought the iconic brands of Jaguar and Land Rover. 

"Foreign investors - ranging from foreign government-promoted initiatives, to private-led projects, and high-level visits are moving at increasing speed and size. For example, in December, the Chinese Premier, Russian President and French President visited India with large governmental and business delegations, while in November US President Obama was accompanied by over 250 US businessmen - the largest ever foreign delegation of US business to Indian shores. Japan, after decades of being shy of the Indian market, is now investing in the largest (over US $150 billion) infrastructure project in India, the Delhi-Mumbai Industrial Corridor. Infusion of such large investments and ambitious projects will very soon help India transition its social and physical infrastructure," says Sachdev.