Infrastructure is a key driver of the overall development of Indian economy. It is seen that investments in infrastructure equal to 1% of GDP will result in GDP growth of at least 2% as infrastructure has a “multiplier effect” on economic growth across sectors. The recent headway made in developing transport infrastructure will prove to be the biggest enabler for growth.

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The critical role of finance in economic growth is widely acknowledged and developing well-functioning financial markets has become a central focus of economic policies across the world. A new World Bank study suggests that investing in infrastructure in regions with basic financial development can help these regions overcome barriers to economic growth. According to Economic Survey 2018, India will need about USD 4.5 trillion in the next 25 years for infrastructure development.

Challenges faced by infrastructure projects in India:

• Political and regulatory risk: it has many facets. There are various categories of approvals required across the project cycle at every stage, right from the pre-tendering stage to post-construction. They include community opposition on an investment, changes to asset-specific regulations and breach of contract terms. In the case of India, denial of payments from the government that go against contractual agreements seem to be perceived as highly likely to influence future investment decisions.
• Land acquisition: Several projects  have  been  stalled  or  delayed  due  to  land  acquisition    There are multiple reasons that lead to delays in land acquisition.  One  primary  reason  has  been resistance  from  farmers  or  local  communities  whose  land  is  being  acquired. Large road and energy projects can take several months to be awarded and if processes are not clear and impartial enough, investors hardly mobilize resources to bid.
• Environmental Impact Assessment: Environmental safeguards and guidelines are evolving, which are similar to the scale and complexity of infrastructure projects. While new projects need to comply with these regulations, even a project under construction may sometimes need to comply with revised standards midway through the execution stage.
• Access to financing: It touches upon the core feature of infrastructure: its long-term payback period. It affects financiers and investors who are looking for long-term and steady returns. After the global financial crisis though, long-term lending is not easy to get, India not being an exception.
• Capacity of private players: another emerging challenge for the achievement of large infrastructure projects is the capacity of the private sector to undertake or implement such projects.

Measures needed:

• Land acquisition: by relaxing transfer regulations for land it owns, the government has taken a positive step. This  should  resolve  the  delay  of  projects  by  procedural  issues,  and complement the guidelines to resolve land issues. The government is expected to follow up with land acquisition policies or guidelines for project authorities and sponsoring agencies
• Fast-track policy and regulation reforms for enhanced implementation: Sponsoring agencies  need  to  make  a  concerted  effort  to  develop  strong  performance management  systems  to  drive  timely  execution  of  This includes defining performance standards for nodal agencies and creating a transparent and accurate tracking mechanism as well as performance-linked incentives and penalties.
• Dispute resolution: Given the extremely slow pace of Indian courts, this can be a long-drawn process. The government may also consider setting up single quasi-judicial authority for all the infrastructure sectors. This authority would have statutory powers to resolve disputes between the authorities and private developers.
• Eliminate Regulatory Cholesterol: A large  number  of  projects  are  delayed  due  to  delayed  regulatory  approvals  or clearances from different agencies. Government agencies often function independently, and there is no incentive or obligation to cooperate with project authorities to expedite the approval process. To eliminate this issue, a Performance Review Unit should be given powers to gather information from nodal agencies on clearances and incentivise or regulate this.
• Facilitating funds: Setting up of Infrastructure Debt Funds(IDFs) and reduction in ‘withholding tax’ on the interest paid on these bonds are some other positive measures that are expected to facilitate the flow of long-term debt into infrastructure projects
• Private-Public Partnerships: Allowing the private sector into some former fully government-owned infrastructure sectors, such as telecommunications and domestic civil aviation, has produced exemplary results. Early experience with private involvement in these areas is generally positive, but outcomes under contracts need careful monitoring.
• Independent authorities and facilitators: The government has set up a Project Monitoring Group (PMG) to track frozen projects and remove bottlenecks. Any project in infrastructure can be referred to the group for resolution. The PMG has already been successful in resolving more than 200 of the projects referred to it, worth nearly 30% of the value of all projects, according to the World Bank.

Conclusion:

If  proper  effort  is  made  in  expanding  education,  health  facilities,  and  physical infrastructure and improving their quality by increasing budgetary allocation and improving governance, it will go a long way in reducing poverty, improving human development, and reviving and sustaining high rates of economic growth in India.