Report:Infrastructure Delays To Cost India US$200 Billion
Aug. 13 – Delays and inefficiencies in the execution of infrastructure projects in India could result in a US$200 billion loss to gross domestic product (GDP) by 2017, according to a report made by management consultancy McKinsey & Co.
“The shortfall in awarding projects as per plan (eleventh and twelfth Five-Year Plans) could result in a $100 billion loss to GDP; time and cost over-runs in project execution could lead to another $80 billion loss; and capital constraints would account for the remaining loss of $20 billion,” Prashant Gupta, partner, McKinsey & Co, said in the report titled ‘Building India: Accelerating Infrastructure Projects.”
The projected GDP loss of $200 billion would be one-tenth of India’s GDP in 2017. Delays could also cost the economy 35 million jobs over the next eight years. “In addition, the economy could lose up to $160 billion by forgoing the industrial productivity impact of infrastructure,” the report said.
India is expected to fall well short of its targeted investment of US$500 billion between 2007 and 2011. Various reports peg the actual investment to be between $270 billion and $320 billion.
In comments reported by DNA India, Praveen Sood, chief financial officer, of Hindustan Construction Company, said: “China completes any project 2-3 times faster than India. There should basically be a willingness to implement the reform process,” he said, citing Mumbai’s Bandra-Worli Sealink, which took 8 to 9 years to complete compared to the scheduled period of four years.
Chris Devonshire-Ellis, of Dezan Shira & Associates Mumbai office, told India Briefing: “The majority of the delays are caused by land reform problems and the political issues that go hand in hand with them. Huge swathes of prime land required for redevelopment in India have been unavailable due to archaic land use rights. ”
“The government, if it can deal with the legal issues over land reform and development will be able to improve upon the situation outlined by McKinsey. I find the report of interest, however, it fails to take into consideration the underlying causes and the new abilities of the current government to move ahead with regulatory matters and to get obstacles removed.”
He added: “To compare today’s China with today’s India is also incorrect as the Chinese development pace occurred far earlier and has now reached a far higher investment plateau. We remain bullish on India and such comments in a massive emerging economy are not unusual. McKinsey also have reports to sell, and I would take any such doom and gloom with a pinch of salt.”
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