Breaking The Inertia

Amid the anxiety and the anticipation awaiting the next Union government, as the country goes into polling mode, the infrastructure sector got some news to cheer about. The decision of the Planning Commission to propose the setting up of a Cabinet committee on transport, a move that could lead to speedy decision making in the sector, is a welcome move. The proposed committee will be on the lines of the Cabinet Committee on Investments (CCI) that was established in 2013 and owes its genesis partly to the recommendations of the National Transport Development Policy Committee, chaired by Rakesh Mohan. While the move could invite stiff resistance, a final decision will be taken only by the new Planning Commission, which will be constituted after the general elections.

The recommendations of the Rakesh Mohan committee have come at a time when infrastructure development in the country has failed to cope with demand in many sectors because of policy-related issues that have stalled private investment. The committee was set up in 2010 to assess the transport requirements of the economy for the next two decades.

Apart from the unified transport ministry proposal, the committee has also suggested that investment in the transport sector needs to be scaled up from Rs 10 trillion in the 11th Plan to Rs 70 trillion by the end of the 15th Plan period in 2032, 20 years from the base year of 2012. As of now, there are five different ministries handling key transport sectors like railways, road, civil aviation, ports and shipping and urban transport.

The trillion dollar investment dream target of the government in infrastructure sectors in the country during the 12th Plan period (2012-17), 50 per cent of which is expected to come from private players, looks a distant dream as the sector has failed to attract investment from private players. However, with the setting up of the proposed unified committee, it is expected to work out for the betterment of the sector as it will be based on the existing Cabinet Committee on Investments, which has facilitated clearance of 147 projects worth Rs 5 lakh crore. The unified transport committee will resolve inter-ministerial issues in a time-bound manner, thereby facilitating investments in these sectors.

On the other hand, what was also pleasantly surprising was the core sector growth indicator.

Core industries’ output grew 4.5 per cent in February, the highest in the last five months, against 1.6 per cent in January. The growth was fuelled by the robust growth in the electricity sector which saw 10.4 per cent growth during the month, almost double of the 5.7 per cent logged in January. The strong growth in electricity generation was the result of robust performance of thermal, hydel and nuclear power. Steel, cement and refinery products improved their performance during the month. This growth raised the hope of a stronger recovery in industrial growth in February than just 0.1 per cent in January, as the eight core industries fertilisers, cement, steel, electricity, crude oil, coal, petroleum refinery products and natural gas constitute almost 38 per cent of the Index of Industrial Production (IIP).

But, core sector and IIP do not always grow in tandem as can be gauged from the fact that the core sector grew 1.6 per cent in January this year against 2.1 per cent in December 2013. However, IIP contracted in December 2013 and grew in January this year.

Two core sectors contracted in February, against three in January because coal output rose marginally by 0.1 per cent against a contraction of 0.7 per cent in the previous month. The fall in natural gas also slowed down. It was 5.2 per cent in January and 4.4 per cent in February. However, fertiliser production, which rose 1.2 per cent in January, declined 0.7 per cent in February. Also noteworthy is the fact that steel production rose 4.8 per cent in February against 3.4 per cent in January; cement 2.3 per cent against 1.5 per cent; refinery products 3.2 per cent against a fall of 4.5 per cent; and crude oil by 1.9 per cent against three per cent. The growth in the industrial output was seen in January after it contracted for the previous three months.

Though it looks like India infrastructure is on life support, these indices indicate that there’s still some potential for recovery… That is, if the new dispensation reads the tea leaves right.