A Shiny New Airport but Infrastructure Challenges Abound (and May Even Be Worsening)

For decades, Indira Gandhi International Airport (IGIA) in New Delhi was a source of national embarrassment.  Disembarking at the ramshackle facility instantaneously imparted a sense that one was entering a chaotically-managed Third Word country.  (Of course, the drive from the airport to the city center – along narrow, congested and dilapidated roads – furthered the impression.)  IGIA ranked second in an October 2007 listing of the world’s worst airports by Foreign Policy magazine, and was named the worst airport in Asia in a 2009 poll by sleepinginairports.net.  The inevitable comparisons with the ultra-modern airports in Beijing and Shanghai only reinforced the common perception that China is destined to be Asia’s hegemon. 

(One might also mention just how damaging it is to India’s reputation that the large majority of its airports – including those in Chennai, Kolkata, Pune, Ahmadabad and Mangalore – are currently unlicensed by the country’s civil aviation regulator.  The U.S. Federal Aviation Administration is threatening to downgrade the safety ratings of these airports to sub-Saharan Africa levels.  See the June 25th report in The Times of India.) 

IGIA’s reputation, however, was salvaged with last week’s unveiling of a new world-class terminal.  The vast, nine-level structure (officially known as Terminal 3, or T3 for short) is designed to handle 34 million passengers a year and will double the airport’s overall capacity.  It is India’s biggest public building and one of the world’s largest airport terminals.  (For an overview of T3, see here).  Equally impressive – especially for a country where major infrastructure projects are regularly plagued by prolonged delays, massive cost overruns and government red tape – is that T3 was built in record time (just over three years) and on budget, by a private-public partnership.

Although it will open for international passengers on July 14 and domestic travelers two weeks later, T3 has already become a symbol of national pride.  According to Prime Minister Manmohan Singh, the structure “signals the arrival of a new India, one committed to joining the ranks of modern industrialized countries.”  Praful Patel, the civil aviation minister, calls T3 “not just a building [but] a statement,” one that confirms “that India has truly arrived on the world stage.”

India has launched a concerted drive to upgrade its antiquated airports.  In the past two years, gleaming new airports have opened in Bangalore and Hyderabad, and a sparkling new terminal at Mumbai’s congested airport is due to open in 2012.  (By the way, Hyderabad’s Rajiv Gandhi International Airport is ranked the world’s fifth best facility by Airports Council International, an industry group.)  The central government has also green-lighted the construction of seven other new airports.

Yet despite the ray of hope cast by these airports, India remains bedeviled by what Kamal Nath, the road transportation minister, calls the “world’s biggest infrastructure deficit.”  According to the World Economic Forum’s 2009 Global Competitiveness Index, India ranks 89th out of 133 countries in terms of the quality of its overall infrastructure.  (Equally dismal are India’s scores on specific criteria: quality of roads (89th rank); port infrastructure (90th); air transportation infrastructure (65th); and quality of electricity supply (106th).  The dire disrepair of its physical infrastructure is a severe weight on India’s economic trajectory and costs upwards of two percentage points of lost growth annually.

Last month, the New York Times carried an article on the run-down state of the national rail system.  It noted that moving containers via rail over the 900-mile distance from Mumbai to New Delhi takes three times longer than transporting them via ship the 2,400 nautical miles from Singapore to Mumbai, the country’s largest seaport.  And rail freight tariffs are four times what U.S. companies charge and twice as much as in China.  The Indian government’s latest annual economic survey also notes that the average turnaround time for ships docking in major Indian ports was 3.87 days in 2008-09, compared to 10 hours in Hong Kong. 

The central government has a consistent record of failing to deliver on large-scale infrastructure projects.  Although the National Highway Authority of India has ambitious road-building plans, over 80 percent of current road projects are running behind schedule.  The Indian Planning Commission, an economic planning agency, acknowledges that half of the port development projects envisioned in the 2007-12 period will not be completed on time.  And government efforts for adding new electricity-generation capacity routinely fall markedly short of announced targets.  (For a 2008 PricewaterhouseCoopers report on India’s infrastructure plans, see here.  For an August 2009 report by McKinsey & Company on the country’s problems in implementing infrastructure projects, see here.)

Earlier this year Prime Minister Singh announced that, in order to sustain high levels of economic growth, the country needs to double infrastructure from the current level of $500 billion in the 2007-12 period to $1 trillion in the 2012-17 timeframe.  This target vastly exceeds domestic funding capacity, however.  The central government is facing high budget deficits, and current Indian law prohibits financial institutions like insurance firms and pension funds from investing in infrastructure projects.  New Delhi is hoping that foreign investors will help bridge the gap but so far overseas funding has been slow to materialize.

The infrastructure challenges confronting India were further underscored by a McKinsey Global Institute report released a few months ago.  It argues that the country will undergo an urbanization process of seismic proportions over the next two decades, with city populations nearly doubling to 600 million people by 2030.  By this date, India will have six megacities with populations of 10 million or more, at least two of which – Mumbai and New Delhi – will be among the five largest cities in the world.  To prepare for this demographic transformation, India must invest $1.2 trillion on core urban infrastructure over the next 20 years – an eight-fold increase from current spending levels – as well as an additional $1 trillion on operating expenditures. 

The prospect of rapid urbanization imposes an unbelievably daunting challenge.  In transportation alone, the country will need to build 350-400 kilometers of new subway lines annually (more than 20 times the subway capacity created over the last decade) and between 19,000 and 25,000 kilometers of roads every year (nearly equivalent to the amount India has added over the last ten years).  India will also need to add 700-900 million square meters of new residential and commercial space a year—equivalent to creating more than two Mumbais annually.  If the country fails to address these challenges, the McKinsey report envisions a starkly dystopian future for India’s cities.

Will India be able to overcome its infrastructure deficit?  The shining examples of T3 and New Delhi’s sleek air-conditioned Metro system are hopeful portents that India has finally turned an important corner.  But the upcoming Commonwealth Games, which will take place in New Delhi this October, offers a fresh test of the country’s infrastructure prowess.  The Games are the biggest sporting event India has ever hosted and are widely seen as a grand opportunity for New Delhi to burnish its great power credentials.  But four months out, the signs are decidedly mixed as to whether India will be up to this challenge.  Stay tuned.

UPDATE

 Subsequent to my last post on the rising stature of Indian-Americans, the Washington Post published an article on the record number of Indian-Americans running for political office this year.  It’s worth a read.