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With the conducive environment, investor confidence will go up

With the conducive environment, investor confidence will go up

Infra development will bring about changes for cities. Subrat Nath, Director India and Asia Pacific, Talgo, speaks on how to mitigate the problems that will crop up during this period.

Research indicates a significant shift in infrastructure investment away from Western economies to the eastern hemisphere. Are India, China and other emerging economies mature enough to handle the sheer incremental volumes of infra projects over the next decade?
Infrastructure is the backbone of any economy. But good infrastructure development needs good planning. Lack of planning is the biggest problem. China in comparison to India has shown better planning and flexibility while executing infrastructure projects. India has lagged behind due to its political system and populist outlook. So I will like to say that both India and China are capable of handling incremental volume of Infrastructure, but for India it is very important to learn from the past and plan for the future.

What is the nature of re-calibration needed to ensure ground level deliveries in the sector on parameters of competence, efficiency and financial management to maintain global standards of development?
India is taking some welcome moves to get to the global standard. They are in the form of accounting and taxation reforms. While preparing a project, one of the important things to keep in mind is bankability of the project. If the project is not bankable, it will never be executed. A healthy bankable project will bring in better competence.

With Europe also poised in 2018 for positive growth, for the first time since the 2008 financial crisis, what are the lessons from the pre-2008 mistakes of financial (mis-)management needed to be incorporated by Indian industry and the banking sector?
More than the positive growth of the European Union, the entry countries are important. The practice in EU is to invest in new member countries such that they can come to more or less the same level (with the rest of the EU) in terms of infrastructure and facilities for citizens. We in India need to work on ease of doing business and develop a conducive environment for external companies such that they feel confident about getting their returns. Secondly, we have to stick to timelines; the project tendering cannot go on passing from one year to other.

What are the pre-2008 mistakes that should be avoided by industry and financial institutions that fund infrastructure while undertaking the massive infra development that is projected in India?
The government has to bring in changes in the system such that there is increased interest from banks and foreign investors to invest in Indian infrastructure. Financial institutions also need to assure that the project is free from land acquisition (troubles) and if it is a project involving various states, there has to be a clear agreement of rights and obligations between them.

With an estimated 500 million people expected to shift from rural settings to urban regions in India over the next40 years looking for a better quality of life, how can the infra sector maintain a healthy/accelerated pace of professional development?
The first need is to provide better life around the city. Now the immigration is to the city and that is a major problem which takes away working hours (during travel). Better public transport to join the city centre with nearby smaller cities is a boon. The perfect example can be Madrid and Toledo. With a high speed train connection, the 90 km distance can be covered in 45 minutes. Then people prefer to have a bigger house and spend less on their family. We have to make the cities more sustainable.

Residences need to understand the value of waste management. Energy management with SCADA and smart meters can smartly manage the supply, according to demand.

Prime Minister Narendra Modi has called upon the capital and bond markets to spur the ongoing infrastructure development plans as a social commitment. How does the industry respond to this expectation, considering that the Indian government has already facilitated policy decisions to create an enabling climate for investment in infra?
The Prime Minister´s moves are a boon to our country. But the experience of holding infra assets has not been good for financial institutions. I am sure this will change and with the present conducive environment, the confidence of investors is going to go up.

A PwC report emphasises the need for a ´hands-on´ approach by CEOs of infrastructure firms in respect of operations as well as data analysis…
If a project is not well planned, it is very difficult to manage it at a later stage. So what is important is better DPR and financial analysis of the project which will make the running smooth during the payback period. Of course it is great that CEOs have a hands-on approach to make sure expectations of users and investors are met.

Is there adequate digital competence and applications ability to move from the mindset existing today, to make this vision a real probability?
Yes, but there is the challenge in its implementation, which has to be accelerated.

China has always outpaced India on most sectors of achievement and parameters of infrastructure development. Is India likely to catch up or even surpass the Chinese as is being ambitiously talked about in the new narrative for Indian industry?
It is difficult for India to catch up with China in a decade. But if we keep working and making the business environment healthier for FDI, we can surpass China for sure in the next decade. The disadvantage China has is that it has not been able to provide a fair legal system which India can.

Which hybrid financial models would be the mainstay of infrastructure investments in 2017? Will the PPP model find traction over the next two years or are EPC and hybrid annuity models here to stay?
Infrastructure development in a country as vast as India will have different requirements. There will be projects which have to be executed by hybrid annuity models, others by EPC. But our idea should be to make all the major projects bankable and structured in a manner that we can attract FDI and PPP.

A lower interest regime and focus on capital and commodities markets has been espoused by PM Modi for creating infrastructure finance. How can this be done without adversely impacting the infrastructure business, as the recent demonetisation has done by bringing the entire cash-based transactions (involving transportation, contract workers) to a halt?
The infrastructure sector has to go cashless. This will make the transactions simple. In the short-term, demonetisation can negatively affect the infra sector, but it´s a boon in the medium and long term.

What are your expectations based on industry talk from the forthcoming Union Budget for the 2017-2018 fiscal year? What would you like to place on the infra industry wish-list for a positive fallout on the sector?
We need more investment in energy and transportation, with a focus on Smart Cities.

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