People do get impressed with quality infrastructure

Tarry, the tortoise way # If we build ‘excess’ infrastructure, we risk not being able to pay for it An unintended consequence of slow investment in infrastructure of the physical type is that we may be investing more in education and knowledge-based economic activities JAITHIRTH RAO Indian Express Monday Jul 03, 2006

We all know that we can have a situation where supply leads demand. This is the situation in Beijing and Shanghai, where millions of square feet of space with all the attendant appurtenances of postmodern urban landscapes are in place even before the demand fully soaks it up. Every mid-sized Chinese town has world class airports and first rate motorways. On a smaller scale, Dubai is building dozens of towns on the assumption that people will ultimately inhabit them. People do get impressed with quality infrastructure. Investment and economic activity do follow most of the time. But beware, it may not always happen. And when it does not happen sufficiently the second and third order consequences can be literally “depressing”.

Due to unplanned inefficiencies, India has the opposite situation. Our demand for infrastructure greatly exceeds our supply. We put up supply only when the situation becomes unbearable and even then it is never adequate. Supply is always chasing demand. The advantage of this approach is that the fiscal and financial systems are in a more robust condition. The Chinese and Dubai real estate developments are financed by banks and other institutions which could be caught in a vicious downward spiral if there is a speed-breaker to the growth story. And we know that when financial systems get compromised, it is not just a few investors who lose money.The ripple effects can cause deep recessions, even depressions.

It is unlikely that India will have uninhabited ghost cities with banks carrying on their books the euphemistically termed “non-performing” loans — a distinct possibility in China or Dubai. The modest toll on the Mumbai-Pune was initially avoided by many cars and trucks. It is only now that the highway is getting better utilised. Clearly, paid demand took time to catch up with supply. If this is true on the most affluent stretch in the country, it is almost inevitable that if we build “excess” infrastructure, we run the serious risk of not being able to pay for it economically.

May be our procrastinations and inefficiencies help us after all! An unintended consequence of slow investments in infrastructure of the physical type is that as a society we may be investing more in education, telecommunication-based services and in what are loosely described as knowledge-based economic activities. Watching Indian TV channels makes it obvious that when it comes to the delivery and content we may actually be leapfrogging ahead of the world. The same is true of cell-phones. When I see the enormous success of “instant democracy” where voting by cell-phones decides the fate of TV programmes, I see real-time, cross-channel integration that is really cutting edge. India’s software success is among other reasons, because exporting lines of code does not require harbours or airports. Telecoms, satellites, fibreoptics and cell phones have been our saviours.

Fascinated by the examples of Shanghai, Singapore and Dubai, we seem to be succumbing to the seductions of massive physical infrastructure and the attendant real estate gambles. We should be careful that this does not become an “either-or”. The lure of hard infrastructure may tempt us away from the focus on human capital (we need toilets and English classes in our state schools) in addition to roads and metros. If tempted by the latter we ignore the former, it will indeed be a calamity. On the other hand, if we adopt an “and-and” strategy where along with building six-lane highways, we enhance soft infrastructure, then and only then can we be optimistic about the future of our citizens. The writer is chairman and CEO, Mphasis jerry.rao@expressindia.com