Thursday, January 7, 2016

[Editorial # 35] Think different on infrastructure : The Hindu

[Following editorial has been published in The Hindu on 7th January 2016. Read through it and try to answer the questions that follow. Please do not copy and paste answers. The objective of this exercise is to get you in the groove of answer -writing. Try to write in your own words. Don't hesitate to write in a bulleted-format, if you are uncomfortable in writing in paragraph form.]

When the going gets tough, public investment must be stepped up to pump-prime a slow-moving economy facing uncertain headwinds of low commodity prices and faltering international trade. When the going is good, the private sector would also have a role to play, Finance Minister Arun Jaitley has said, vowing to ramp up infrastructure investments in 2016-17. Ten months ago, in his first Budget for a full financial year, Mr. Jaitley had scaled up such investment to Rs 1.25 lakh crore, two-thirds of which was earmarked for road and railway projects. In the coming year, he has indicated that the priority will be rural infrastructure as the stress in India’s villages after two bad monsoons has hit demand. This is deterring fresh private investment, with many firms still struggling with past investment plans that are stuck or have become unviable. While economists debate whether the government should stick to its fiscal consolidation road map or scale up public expenditure to spur the economy, nobody will mind if a slightly higher fiscal deficit leads to more jobs while creating useful public assets. Low oil and commodity prices offer the chance to build more infrastructure at a far lower cost, but as Mr. Jaitley said, “We must have the intellectual honesty to analyse our shortcomings and improve them.”

So have higher allocations to infrastructure spending this year helped? Anecdotally, a few signs are positive. Demand for bitumen, a key ingredient for building roads, has risen, as have enquiries for construction and earth-moving equipment. Paying private contractors to build highways has boosted cash flows and enabled a few to re-enter the fray for new projects. But all is not well yet. Core sector performance hit a decade’s low in November 2015. “Though public investments have started to gain traction, this is yet to reflect in the performance of investment-linked sectors,” rating agency Crisil said, as demand remains weak in end-user sectors such as real estate, with overcapacity in others. Of course, this is partly the lag effect — infrastructure projects take time to show results. Yet, an honest introspection should reveal the need to utilise public infrastructure budgets more effectively without the cost- and time-overruns associated with the government’s ‘business as usual’ approach. Take India’s largest industrial infrastructure project, the Delhi-Mumbai Industrial Corridor, set up as a special purpose vehicle to shed the legacy burdens of departmental decision-making. It’s crawling, though all the States along the corridor except Delhi are run by the BJP. Or the Project Monitoring Group under the Cabinet Secretariat tasked with resolving stalled projects, on which not much has been heard in months. Could the fact that these bodies were left without a head through most of 2015 have affected performance? Tapping the Consolidated Fund of India as well as innovative vehicles such as the National Investment and Infrastructure Fund is laudable. Perhaps, it is also time to find a few good men who can get the job done on the ground, grant them autonomy and fix accountability for outcomes.


1. Explain the following terms/phrases: (50 words each)

    Public Investment
    Fiscal Consolidation
    Public Expenditure
    Public Assets
    Core Sector
    Lag Effect
    Consolidated Fund of India

2. What is meant by 'infrastructure'? How is infrastructural development linked to well being of a common man?
3. What bottlenecks are impeding the path of infrastructural development in India?
4. What steps are required to boost infrastructural development in India?
5. What is CRISIL? Where is it headquartered? What is its role?
6. What is Delhi-Mumbai Industrial Corridor? Why was this project mooted? Trace the corridor on the map of India.
7. What is National Investment and Infrastructure Fund? Why was it constituted? 
8. What is Bitumen? How is it produced? What are its applications?
9. What is a Special Purpose Vehicle? Why and how is it conceived? Explain with examples.

10. Programs like Make in India, Skill India and Digital India can't be successful without a higher infrastructural growth rate. Comment on the above statement throwing light on the steps the government has taken to achieve the same. (200 words)


  1. 1.a.PUBLIC INVESTMENT means the amount of money that the government spends on public services such as education , health etc
    b. FISCAL CONSOLIDATION is the steps taken by the government to arrest the rising fiscal defecit.This means the income of the government has to be increased.this can be done in the following ways:-
    1. reduce subsidies
    2. increase taxes on the civilians
    3. higher interest on loans
    4. make PSUs profitable by the principle of subsidiary
    5. recover black money
    6. austerity measures like giving up gas cylinders, no facilities to the opposition members by the govt
    3.PUBLIC EXPENDITURE:-The expenditure incurred by the public authorities like the central, state and local bodies to satisfy the collective wants of the public is known as public expenditure.
    8 core sectors have been identified as of now based on their scope of impact on the rest of the sectors. there are 8 core industries:- coal, cement, crude oil, refinery product, natural gas, fertilizers,electricity,steel . all these have approximately 38% of weightage in IPP released by DIPP.The Index of Eight Core Industries released about two weeks prior to the IIP release provides an advance indication of performance of more than one third of the IIP basket.
    an expected increase in foreign exchanges leads to LEAD EFFECT while an expected decrease in it leads to LAG EFFECT. both the lag and lead effects are attempts to improve profits.
    CONSOLIDATED FUND OF INDIA:-article 266(1) of the indian constitution provides for the establishement of CFI where all the money raise by the GOI either by taxes, loans raised through treasury bills, or money received on payments of loans have to constitute CFI.The money spend from CFI has to have legal backing of parliament or executive order(salaries).

  2. 2. What is meant by 'infrastructure'? How is infrastructural development linked to well being of a common man?
    A.The basic physical systems of nation is called infrastructure. construction and maintaining of infra is costly one but however it serves as an asset to the nation in long run.
    Investment in infrastructure like
    roads, railways, bridges: increses connectivity between the regions. This inturn increases the investment from the foreign capital which leads to the raise in employment levels.
    pipelines, refinery plants : increases the availability of energy resources like oil,petrol which helps for transportation.
    education,health,women empowerment ,skill development called as SOCIAL INFRASTRUCTURE that promotes employment which helps in the levels of salary levels of the people.Hence common man can be atleast able to meet the basic needs.

  3. 3. What bottlenecks are impeding the path of infrastructural development in India?
    A. infrastructure is considered as the engines of growth. Infrastructure can be broadly classified as physical and social infrastructure.
    The following are the causes for the lack of development in both the classifications.
    a. lack of consensus among political parties:- the lack of consensus between the major parties lead to the failure of the passage of major bills such as land acquisition bill(lab), GOods and service bill etc in the Rajya Sabha.
    The LAB, the potential to acquire the lands from the land owners to move further with the project
    The GST bill which is estimated to raise the revenue of the govt by 1% of GDP can be used again be reinvested in the social or physical infrastructue.
    The role played by the non state actors such as NGO like GREEN PEACE, FORDS FOUNDATIONS which raise concern regarding the human rights violations caused due to displacement of peoples; deforestation, habitat fragmentation etc.
    The big ticket projects needs astronomical investments which india has to depend on foreign investors routed through FDI, FII, external commercial borrowings etc. These investments with a profit motive invest in the areas which are profitable to them.
    The opaqueness bureaucratic systems which is deeply rooted across the length and breadth increases the chances for the failure of the government in promoting investment.
    1. reduction in Social security schemes:-
    the governments agenda of reduction in social security schemes by 20% in the budget is the major reason which worsens the social indicators in health( MMR, IMT,), EDUCATION(increases the drop outs)
    Tough the Center had rolled back in the major sectors except the big tickets like infra projects , not much resources had been provided to the states to meet the challenges at the ground levels.
    HUGE POPULATION:- the huge population is the major concern in all spectrums ranging from security to health issues.Hence family planning has to be encouraged both in letter and spirit.

  4. 4. What steps are required to boost infrastructural development in India?
    A. Infrastructure projects are the engines of growth for any economy.
    1. need of consensus between the political parties with respect to LAND ACQUSITIon bill and GST bill, so that the state could walk the talk of lip services about development during election campaigns. This increases the credential trust among the investors who are very much essential for a fair play in promoting development.
    2.regulation of NGOs and other non-state actors without compromising the fundamental rights such as freedom to form associations etc.
    3.encouragement of the investor friendly measures through e-governance has to be implemented in spirit such as single window mechanism.
    4. investment in environmental friendly projects through Clean Devlopment Mechanisms has to be prioritized.
    1. skill development programmmes to be implemented as per the needs of the industry to bridge the gulf of industria-academia.
    2. reduction in red tapism and spread of red carpet to the enterpreners has to be encouraged without compromising the quality of servies. of projects has to be backed by proper maintenance measures to make the projects more sustainable.
    4.encouragement of personnel for motivation through promotions, dear allowances,insurance coverage has to be guaranteed
    1.India has to institutionalise a mechanism to identify the areas of cooperation that benefits any two countries and talks have to be held to maintain the fair relations through diplomatic channels.This helps to harness the potential areas.

  5. 5. What is CRISIL? Where is it headquartered? What is its role?
    A. Credit Ratings Information Services of India Limited is a credit rating agency other being ICRA ltd, CIBIL etc. It is a global analytical company providing ratings, research and policy advisory services.It has its HQ in mumbai
    founded in 1987.

  6. 6. What is Delhi-Mumbai Industrial Corridor? Why was this project mooted? Trace the corridor on the map of India.
    A. DMIC is an infrastructure project worth of USD 90 bn (4,30,000 crores) being implemented with the support of japan.
    The objective of the project can be classified in terms of economic and social reasons.
    The project is mooted for economic development of india. The project helps in the estb of industrial zones thus promoting employment oppurtunities across the corridor.The backbone of the project is the Dedicated freight corridor passing through 6 states.This helps in the reduction in the stress on the roads and railways. This leads to the reduction of prices.
    this big ticket project aims in promotion of industrial corridors which doesnot leads to the emergence of slums. Moreover the well connected road , rail and air ways will reduce the GHGs levels due to the time saving public utilities if well planned.

  7. 7. What is National Investment and Infrastructure Fund? Why was it constituted?
    A. NIIF is fund created by GOI to improve the economic development by stimulating the infrastructure projects. It is constituted to raise debt to invest in brown and green projects which are commercially viable.
    Its functions are to provide clearances for the projects to be invested and perform the supervision; providing a shelf of industrial projects and providing advisory services.

  8. 8. What is Bitumen? How is it produced? What are its applications?
    A. Bitumen is dark viscous organic fluids that appears like tar. It is produced by fractional distillation process. It is the heaviest material which needs a temperature of above 500oc.IT IS used in road construction, walls and roofs of houses, waterproof boats etc.

  9. 6. Project was mooted as Government ks planning to settle 23 manufacturing hub and 24 green cities along the corridor which would add 4 times strength to current population level in the area which is already facing lot of water crisis.