India-China Infrastructure Comparison

Q1 Discuss 5 Infrastructure areas in which China is ahead of India. A1:- As China is to manufacturing, India is to services. That’s an over-simplification but it is the key conclusion .Manufacturing prowess is typically the yardstick that is used to measure the prosperity of emerging nations. As seen from that standpoint, there’s no comparison. China has plowed its huge reservoir of domestic saving — about 40% of GDP — into some of the best infrastructure you will see anywhere in the world. And it has been brilliant in attracting massive inflows of foreign direct investment as the means to acquire technology, managerial expertise, and factories on a scale and with scope that is hard to believe. China has, in fact, leapt to the fore as the largest recipient of FDI in the world — some US$53 billion per year in 2002-03. India suffers in comparison basically from having none of the above. That’s an exaggeration but not all that wide of the mark. India has a 24% national saving rate, only a little more than half that of China. As a result, it has far less in the way of internally-generated funds available to plow back into infrastructure. And it doesn’t take much traveling around in India to experience first-hand the seriousness of its infrastructure constraint. The India Infrastructure Report 2004, put out by the 3iNetwork of India’s best and brightest engaged in this field, says it all, “…even relative to our income, our failure in water, roads, sanitation, schooling, and electricity is woeful.” Nor can India hold a candle to China on FDI. China’s inflows in 2003 were more than ten times the US$4 billion that went into India. But that’s not the lens through which India should be viewed, in my opinion. India’s strength is elsewhere —namely, in an extraordinary stock of human capital. And it has deployed that strength into the creation of world class IT-enabled service companies such as Infosys and Wipro and the service subsidiaries of large conglomerates such as Reliance and Tata. I spent time with each of these companies and was staggered by what they had accomplished in the relatively short time span of the past 10-20 years. The push into IT-enabled services sidesteps what I believe are India’s greatest impediments on the road to development — its infrastructure and FDI deficiencies. Self-sufficient in electrical power — all big companies have back-up generating capacity — the only infrastructure Some Infrastructure comparative Facts. The indicators of modernization are as follows: and how comparatively the two countries score over each other. (a) percentage of population with access to improved water sources (as defined by the World Bank) (b) percentage of urban population with access to improved sanitation Fact Water and sanitation facilities in India are being modernized at a satisfactory rate. Access to modern water supply and urban sanitation facilities in India is better than that in China and improving at a faster rate. The gap between India and the developed countries in this sphere is also narrowing (c) number of internet users (d) personal computers per 1000 people Fact Despite the much heralded information technology boom in India the rate of growth of computer infrastructure and computer literacy has lagged behind the Chinese rate of growth in the last five years. Nevertheless, the gap between India and the developed world has narrowed.

(e) commercial energy use per capita and (f) electricity consumption per capita. Fact Mechanization shows a similar trend to computerization. Thus, while India has done well in terms of modern infrastructure that affect living conditions the same cannot be said of productivity enhancing infrastructure. India has total of 28 million cellular users as of the end of 2003 and 18 million new users were added in 2003. China has total of 270 million cellular users as of the end of 2003 and around 60 million new users were added in the same year. Internet users in India: More than 16 million: see: Internet users in China: 78million. Broadband users in China:17.4 million. see: Boroadband users in India: Quiet Low Less than 28 million tons of iron and steel was used in 2003 in India (An important index of infrastructure construction. This is the total India produced in 2003, and India is a net iron & steel exporter)(This is even less than what China produced in 1978 when China began its reform) China produced around 225 million tons of iron and steel and imported other 35 million tons in 2003 for the construction. 55% of the world cement (Another infrastructure construction index) was used in China. China's expressway (at least 4 lanes, speed limit 100KM/hour or 120KM/hour) reaches 30, 000KM. Around 4, 600 KM is being added each year. India just began its first expressway project in 2003: India produced around 36 million tons of oil (A natural resource index) in 2003 and will face the resource problem soon. China produced 160 million tons of oil in 2003 and imported more than 100 million tons in the same year.

Q2:- Can You Enumerate the Critical steps in making infrastructure leadership a strategy for sustainable development of India A2:- India initiated an ambitious reform programme, involving a shift from a controlled to an open market economy showing signs of overheating because of

basic infrastructure constraints, both physical and human. So far, the bulk of infrastructure was in the public sector. Public sector in India operating in a protected set up has been largely subsidised by the Government. Since the launching of reform, Government is trying to reduce its borrowing which means that further subsidization will not be possible. There is one area where there is a need for private sector and foreign investment to come in. Because of the long gestation period, and many social implications, the infrastructure sector compares unfavorably with manufacturing and many other sectors. For this, specific policies in this area are need to make infrastructure attractive. Clearly, there is a wide gap between the potential demand for infrastructure for high growth and the available supply. This is the challenge placed before the economy, i.e. before the public and private sector and foreign investors. This can also be seen as an opportunity for a widening market and enhanced production The six core and infrastructure industries, viz., electricity, crude oil, petroleum refinery products, coal, steel and cement, having a weight of 26.7 per cent in overall Index of Industrial Production (IIP) achieved 6.8 per cent during 2000-01. Several fiscal incentives were announced by the government for boosting investment in infrastructure projects. Ten-year tax holiday offered to projects in core sectors like roads, highways, waterways, water supply, sanitation and solid waste management systems can now be availed of during the initial 20 years. Projects in airports, ports, inland ports, industrial parks and generation and distribution of power can now avail of 10-year tax holidays during the initial 15 years The Critical Steps:A-A Strong Government with Clear direction "Once committed to a focus on economic growth, some good policy decisions were implemented quickly and efficiently While India's corporate leaders agree that this could be true, they are emphatic that India's vibrant democracy is the only way for the country to ensure that growth and development reaches all. There is chaos in it and sometimes policy decisions tend to be reversed. But ultimately India's democracy is essential for the country's welfare, But come what may any party Govt. may come or go but the direction of development of Infrastructure may not be altered. B- A consistent and thoughtful marketing effort We need to sell India. A USP is what is needed. India's corporate leaders agree that the country's politicians have never sold the country. Much of the investment flowing into the country today is on the back of India's reputation as a place for skilled people who have proven themselves in the information technology services sector. C-Bringing in the Money (FDI and Private Participation) . The importance of infrastructure sector also follows from the fact that foreign investors are now looking at infrastructural development as a yardstick for directing their investments. In fact infrastructural development had taken precedence over wage levels in assessing the investment potential in developing countries. In India infrastructure sector itself is becoming an attractive investment area for FDIs. Already there is a huge demand for funds from the manufacturing sector. On top of that is the demand from the infrastructure sector. Both draw heavily from the savings

of the household sector. The growth of financial savings of household sector however is not rising fast. In this context, the importance of increased obligation of domestic saving needs underscoring. According to the India infrastructure Report (IIR), currently 5.5 percent of the GDP is invested in the infrastructure sector. This needs to be increased to 7 percent within the next three years and 8 per cent by 2005-06, by which time the annual level of investment in infrastructural facilities is projected to treble or rise even more, from the current level of Rs. 6000 billion (US$52 billion) by 2005-2006. The total infrastructure investment requirements for the next five years again have been estimated in the report at about Rs. 4000-4500 billion (US$ 115-130 billion). The task of finding such large amounts and thereafter deploying them productively calls for a close partnership between the public and private sectors, with a vital role reserved for foreign capital. To finance this large short fall, the domestic saving rate needs to be increased by a minimum of 26.7%. besides this has to be supplemented at the margin by FDI. However, this "margin is indeed very important since the role of foreign investment has to be read not only as a gap D- Creation of zones and infrastructure for businesses India has tried to do this with its creation of export processing zones and software technology parks. But the problem lies in some key areas like creation of infrastructure and quick approval of investment proposals. More needs o be done E-. The business-above-all attitude "In India, trade and economic growth have never been paramount. That has to change if we need to be a developed economy by 2020 India's economic growth has always given in to the sentiments of the local industry; like in cases where foreign investments have been. curbed or restricted. Provincial and local governments control the vast majority of capital-hungry enterprises, and that creates an unsolvable collusion between regulators and the state's ownership interests. This is arguably advantageous in the early, low-tech stages of infrastructure and commercial development, but for the future its impact is likely to be less positive Indian Interests have always to be kept in mind while we do our interactions with the other dwellings of mother earth. Conclusion:- With this a belief that we can infact be business leaders and a developed country of the world is what can lead us to a strong nation and lead us to sustainable development.

Q3:- Project and identify 5 Policy Intervention strategies that can be put in place in India. One in each for A) Power B) Transport C) Fiscal D) Communication E) Agriculture

To make these a Robust & growth oriented Ans

Power

Privatise Distribution Privatisation of distribution has a couple of advantages. First, the company will invest in some modern equipment. Second, they will ensure that 100 per cent metering is done and everything is billed. They will also ensure revenue collection. These things will be better taken care of by private parties. But initially, there will be resistance. For example, in Delhi, they have got two agencies operating. They were bold enough to come into the sector but it takes time to come out of the age-old attitudes. This way the Governments also would not be able to go for free power etc. and if they will have they will have to pay it from their budget allocation. 

Transport

Total Policy focus on this with chalking up a plan (like the Golden Quadrangle) in terms of the following: Railways.  Roads  Ports  Air Four major problems that need to be addressed through policy and institutional reforms: 1) Unclear or overlapping responsibilities; 2) Inadequate resource mobilization; 3) poor asset/system management and 4) Inadequate accountability for service outcomes. A suggested way forward is through improved public sector performance and accountability, increased private sector participation and investment, improving customer-responsiveness of the core rail business services, focusing a much larger share of the capital budget on economic priority investments etc.

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Communication

The telecom sector is going great guns. Not much has been done wrong on that front Internet In spite of frequent claims that the Internet will erode national sovereignty, government interest and support is seen to be important both directly and indirectly through its influence on the other factors. Both governments are now committed to the Internet, and we examine changing government roles, primarily the adoption of an ambitious Action Plan in India and the consolidation of two key ministries in China. The Indian Action Plan addresses each of our six dimensions, and is designed to elevate India to the level of information technology (IT) superpower. The impact of Chinese consolidation is less clear, but will also be important in determining the future of the Internet there. We conclude with a discussion of sources of uncertainty. India has total of 28 million cellular users as of the end of 2003 and 18 million new users were added in 2003. China has total of 270 million cellular users as of the end of 2003 and around 60 million new users were added in the same year. Internet users in India: More than 16 million: see: Internet users in China: 78million. Broadband users in China:17.4 million. see: Boroadband users in India: Quiet Low

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Agriculture:-

Creation of strong markets for Agri produce And creation of Processing/Transport/and Preservance.

The infrastructure requirements of the agriculture sector are many and varied. India needs good roads that would allow sufficiently large trucks for speedy and bulk movement of agricultural produce before it turns bad. It needs large cold storage plants, modern drying facilities and communication facilities. Traditionally, India has been an agricultural economy and even today agricultural sector accounts for one third of GDP as well as one third of the work force. Successive governments have realized the importance of agriculture to India and initiatives have been taken for the growth of this sector.