Winds of change

This period of lull before the national election is an unfortunate reality that the industry must deal with, with no end in sight to the prevalent cloudiness around the fate and status of the more than 150 post-clearance projects. The current numbers project a grim reality. Data indicates that work has not started on more than 80 per cent of the build-operate-transfer road projects awarded in fiscal 2012 and 2013, and those awarded earlier are barely half-way through to completion.

Meanwhile, Moody’s once again-now, isn’t that interesting!-reiterated late last month that Narendra Modi is the saviour for India Inc. Indeed, the observer claims that the economy has started to turn the corner, and that growth would be in the 5 per cent range in 2014 and then pick up to 6 per cent next year. A hundred new smart cities and bullet trains to all four corners of the country are just some of the pre-poll promises made by Modi that have added to the growing belief that BJP’s prime ministerial candidate is indeed the industry’s most trusted. Optimism over growth of market economy, job creation and increasing investments abounds.

Moody’s "dare" comes in the face of the circumspection that its counterparts such as Nomura have chosen to display. They have chosen to review their view after the general election. Many practitioners, too, foresee a business uptick only in the second half of FY2015, after a settling-in period for the new government.

For the first time last month, Modi revealed a glimpse of what he plans to do, should he become Prime Minister. While unoriginal, his vision anchors itself in physical infrastructure. Because the so-called Gujarat model’s pivot was visible development through superior infrastructure, while the infrastructure industry had presumed this would be the case. If we know our Modi well, his flamboyance and dramatics would likely kickstart new project awards with a bang: interlinking of rivers, new cities. But mostly, the infrastructure industry is at a standstill precisely because it expects-rather naively, some would argue-that the new national leader will debottleneck planned projects that the previous governments found cumbersome and sticky, and will get them implemented to completion on schedule. While infrastructure growth is one of the major thrust areas for Modi, the industry seems to be in little doubt that a new regime will ease up environmental clearances and speed up stalled projects.

This, alas, may at best be partly true. While Modi’s economic heart seems to be in the right place, it remains to be seen whether he can create conditions that draws investors. Chances are that a new government won’t simply throw away environment concerns but proceed with a development agenda. While creation of 100 smart cities will add to the economic prosperity (as it did in China), it is the existing 3,700 urban areas (including 27 million-plus cities) that require the self-governing and economically sustainable infrastructure as a priority to tackle the growing needs of the population. That is why many economists have rejected the idea.

Yet the new government can do the industry a big favour by fast-tracking projects, including the more than 65,000 pending mining licences. As our Cover Story section reveals, new laws require rehabilitation and resettlement (R&R) processes that include a new social impact assessment. Experts believe that mining may stand to gain-monetarily even-despite added expenses in R&R, because a firm policy ensures time-bound implementation.

That is why all the new government needs to do is, rather than indulge in political bombast, to ensure that its agencies and the industry work in tandem with a solid understanding of the goals that have already been set by the current and previous governments.