Leadership and governance

Vinod Bahety argues that leadership in India has been too domesticated to be anywhere near globally applicable.

Leadership is a key differentiator, whether it’s a perfect or imperfect world. Over the last 10-15 years, India has seen emergence of local and global leaders, which has also coincided with country’s high growth era. Growth and leadership are generally inter-linked in a virtuous cycle, such that growth brings leadership and leadership brings growth. However in last two years, while there has been industry leadership, infrastructure growth has taken a back seat for many other reasons beyond the control of the industry leaders.These factors are both local and global.

Assumed leadership

While the country has seen some development in infrastructure sector during last decade, we have witnessed very few players comparable to global scales. There are some fairly well managed players, who have also made successful global forays, the scene is dominated by fairly marginal family owned regional players. Given this need gap, some EPC companies have forayed into the role of developer, however, there are shortcomings in the overall structure and need for a more arm’s length operation for better governance. We require greater professional leadership as well as consolidation in the infra space.

So while leadership is facing internal challenges, there is also a concentration of many negative macro economic factors which includes delays in policy decision making , fiscal deficit, stubborn inflation, fallout of challenges in US, China, European, Middle East amongst others. The foregoing have perpetuated in financial challenges like high interest costs, Fx volatility, extended working capital cycle and tight liquidity situation amongst many infra players. This has resulted into steep rise in infra segment loans that have been referred to the CDR cell.

Strengths of an infra leader

Infrastructure projects are long term and have lasting effect on economy and society. A well planned and implemented project would serve many human generations and compliment an economy, while a short sighted approach and poor implementation will turn out to be a bane for the society.

Leadership needs a conducive system to deliver consistent results and therefore both are relevant and matter to each other. One of the most successful examples is China, which has emerged as one of the powerhouse on back of infrastructure developments supported by government policies. China may not have given as many respected international leaders as India has, however, they have worked with a focus and commitment, which has seen consistent successes unlike in India, where the inherent innovation and entre­preneurship of our leaders is still largely untapped.

It has been reported many times that the cost of infrastructure gets escalated by 40-50 per cent because of delays in implementation, resulting in constraints on equity, lower returns, lack of interest by investors and strain on governance practices.

However, on a positive note, India has also proven successes in certain pockets like telecom, highways infrastructure backed by frugal innovation of entre­preneurs even when the segments were very nascent few years back and emerged as a case study globally.

In recent times, Indian infra companies have been repeatedly questioned on poor corporate governance. The sector needs a professional leadership which should focus on improving the governance norms on most urgent basis. This is also important for companies aiming to grow globally.

Government leadership

The ramifications of a lack of government leadership on infrastructure industry’s leadership are obvious: Amongst many effects, the most important is overall delay in implementation of the projects and consequently, cost overruns, lack of quality work, high maintenance cost and lower returns. It dissuades long term investors from financing, which is must for successful impleme­ntation of infrastructure projects.

In sum, while the industry has taken steps, we are far from making of global infra players. However, there are few corporate group and I am hopeful in coming years, we will be having global infra players from the country.

Executive Director, Infrastructure Banking, Yes Bank Ltd. Views are personal.