India’s infrastructure spending is projected to accelerate to at least ₹50 lakh crore between FY18 and FY22, making a visible impact on service delivery and providing a foundation for rapid and inclusive economic growth in the country, according to Crisil.
The western region — comprising Maharashtra, Gujarat and Goa along with the Union Territories of Daman & Diu and Dadra & Nagar Haveli — has attracted a major chunk of infrastructure investments, both domestic and foreign.
Each of the western States, with its unique potential and capabilities, has contributed significantly to India’s growth story. Gujarat, the frontrunner in terms of industrial development, ranked fourth among the top 10 States in terms of ease of doing business as per the Business Reforms Action Plan 2017 prepared by the Commerce Ministry’s Department of Industrial Policy and Promotion (DIPP), in partnership with the World Bank Group. Maharashtra and Goa ranked 13th and 19th respectively.
While infrastructure investments are crucial for industrial growth in Gujarat and Maharashtra, Goa requires road development to boost its tourism industry, besides investments to expand its mining and pharmaceutical sectors.
‘Maha’ highway boom
Maharashtra came first in terms of investments in infrastructure projects, especially in the transportation sector, that includes road, rail and port, NITI Aayog revealed in a 2017 report. Out of total investments in infra projects worth ₹50.58 lakh crore, the State obtained ₹5.97 lakh crore.
NITI Aayog’s report is based on investments made till April 30, 2017, and work orders in the infrastructure sector, which means actual investments.
The report said Maharashtra, with 1,097 infrastructure projects under way, was ahead of all the other States with an over 11 per cent share in total expenditure in infrastructure projects.
The State’s experience in implementing projects under the private-public partnership (PPP) model has also been noticed by the Centre. NITI Aayog is now looking to replicate it nationwide.
The Maharashtra government is aiming to grow its economy to $1 trillion by 2025 from the present $400 billion, Chief Minister Devendra Fadnavis said at a conference organised by the Asian Infrastructure Investment Bank in Mumbai this week.
The demand for infrastructure, therefore, is set to expand significantly in the near future and, to meet it, the State government is expediting urban projects such as metro rail, monorail, airports, water and sanitation. Over the past few years, the State has undertaken several massive projects, including metro rail corridors worth ₹1.4 lakh crore in Mumbai, Navi Mumbai, Nagpur and Pune. Several ambitious transportation projects, including the ₹46,000-crore Nagpur-Mumbai Expressway, ₹15,000-crore Coastal Road and proposed Mumbai Trans Harbour Link and the ₹16,000-crore Navi Mumbai International Airport, are at various stages of development.
According to the M Visvesvaraya Industrial Research and Development Centre’s report, the State government’s initiative to build a 701-km, eight-lane expressway connecting Mumbai to Nagpur that will pass through 10 districts and 390 villages will support the growing vehicular traffic and significantly boost the rural economy.
Enhancing rural infrastructure by drawing it into a bigger economy through economic corridors is one of the major aims of the project, as the State’s agrarian sector is facing tremendous stress, the report said. The agriculture sector in Maharashtra is estimated to have contracted 8 per cent in FY18 after growing 22 per cent in the previous year.
Vibrant infra
Gujarat, one of the most industrialised States in the country, which leads in the production of pharmaceuticals, soda ash, salt, plastics and diamonds, is also the country’s largest crude oil refining hub. Its robust infrastructure — including 42 ports, 18 domestic airports and one international airport and extensive road and rail, gas pipeline network, 19 operational SEZs and eight notified Special Investment Regions (SIR) and 182 industrial estates — has been lately experiencing an additional boost from the growing renewable energy generation and transmission infrastructure supporting it.
The State occupied the top position in the National Council of Applied Economic Research’s State Investment Potential Index (N-SIPI) in 2016 and 2017. According to the DIPP, FDI inflows into Gujarat totalled $17.44 billion between April 2000 and December 2017, with the State accounting for an about 5 per cent share of the overall FDI inflows.
Gujarat was one of the first States to develop regulatory frameworks for PPP through the Gujarat Infrastructure Development Act. The Gujarat Infrastructure Development Board (GIDB) has replicated its success in implementing the PPP framework in the ports sector to other sectors, including power, rail and road infrastructure.
According to a revised Blueprint for Infrastructure in Gujarat 2020 programme, an investment of around ₹11,8 lakh crore is planned for the period up to 2020 and will cover sectors such as energy, transportation, SEZs, urban infrastructure and water, among others.
Some of the upcoming infrastructure projects in the State include over 10 new airports (including greenfield ones in industrial areas like Ankleshwar and religious tourism destinations like Dwarka), the Sabarmati riverfront development, the Dholera Special Investment Region, and Smart City projects in Gandhinagar, Ahmedabad, Surat, Vadodara, Rajkot and Dahod.
The Mumbai-Ahmedabad bullet train project, the foundation stone for which was laid by Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe in September 2017, has been facing resistance in eight districts of Gujarat through which the train will run. The land acquisition for the ₹1.10-lakh crore project (for which Japan has extended a loan of ₹88,000 crore at an interest rate of 0.1 per cent) was expected to be fully operational by 2023. However, delays in land acquisition may impact the ability to meet this deadline.
Renewable energy
Over the past several years, Gujarat has emerged as one of the largest renewable energy generating States with the installed capacity mix increasing from 18,832 MW in 2012 to over 26,522 MW in 2017, expanding at an annualised rate of 7.09 per cent, according to the Gujarat Energy Development Agency. While coal has remained the main source of fuel for power generation in the State, thermal generation has been almost stalled as the major imported coal-based power plants, including those of Adani Power, Tata Power, Essar Power and other IPPs, faced challenges after the Supreme Court in 2017 disallowed a compensatory tariff to make up for the change in coal export policy in Indonesia, from where the coal is being imported.
At the same time, the share of renewables in Gujarat has increased from 13 per cent in 2011 to over 25 per cent in 2017 (as on April 1, 2017), expanding at an annualised rate of about 21 per cent during the same period. By 2022, the share of renewables is expected to increase further, as the overall installed capacity in the State is likely to reach 17,133 MW.