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The 4 Pillars of Indian Infrastructure

As it relates to infrastructure development, India is undergoing a mini revolution of sorts. In all, US$59 billion has been set aside this year for connectivity-related infrastructure development. The key pillars of Indian infrastructure are:

  • Power
  • Connectivity
  • DigitalHighways
  • Housing

Let’s examine each of these pillars one by one.


Power

Piyush Goyal is the Power Minister of India and has done a commendable job since taking charge. Under his stewardship, more than 12,000 villages in India have been electrified[1] for the very first time in the country’s history. Many power plants did not have adequate coal supply since coal allocations were cancelled by the Supreme Court of India. Today the government is contemplating a policy to make surplus coal available to plants.

As far as clean energy goes, Prime Minister Narendra Modi is widely known to have an obsession with solar power and is bringing about a renewables revolution in India. Since he has taken office, the power tariff from solar sources has touched rock bottom.

One of the key highlights of the Power Ministry is its transparency in terms of work. Indian citizens can readily assess the work being done by the Ministry of Power by visiting an official website devoted to task monitoring. As more parts of India become modernized, a steep rise in demand for power and electricity is expected.


Connectivity

Surface Transport is overseen by Nitin Gadkari, another popular minister in the Modi cabinet. Since he has assumed office, India has been building 17km of roads per day and the target in 2017 is to double that rate. Immediately after winning the elections in Uttar Pradesh, the government declared that it is allocating close to US$320 million[2] to develop a new highway system in what is India’s most populous state.

India is also actively expanding its riverways and ports. One of the key projects that the Narendra Modi administration is working on is called the Sagar Mala project (or "Sea Necklace"). Under this initiative the government is targeting spending close to US$75 billion by 2019.[3]

Railways across India are also being modernized and public-private partnerships are playing a key role in this development. This will include technology as well as infrastructure upgrades requiring an allocation of around US$140 billion over the next 5 years.[4]


Digital Highways

India is witnessing a total digital revolution.

1.1 billion Indians now have digital identities (called “Aadhaar”) and the government is pushing to link these IDs to common financial services, such as filing a tax return. India added over 250 million internet users since 2014 which is more than half the total number of people who came onto the internet in the world. Many train stations in India now have free Wi-Fi facilities through public-private partnerships. In fact, the Indian state of Kerala has even declared internet access a basic human right. As per a World Bank report, "...a 10 percent increase in broadband penetration (in India) can lead to a 1.4% increase in GDP"[5]. Digital India is one such initiative to connect 250,000 local self government bodies across Indian villages through broadband penetration. [6]

Other initiatives in place designed to promote a more digital economy are the financial inclusion campaign, Jan Dhan Yojna, and the demonetization program which is largely aimed at increasing tax compliance.


Housing

"Every Indian should be able to afford a house" is a notion that Prime Minister Narendra Modi has expressed in the past, and now he has begun to put policy in place to see this through. A flagship program for affordable housing aims to provide a house to every Indian by 2022, which will be the 75th year of India's independence.

This is why "Affordable Housing" was given infrastructure status in India’s 2017-18 Union Budget. As per a KPMG estimate, nearly 110 million houses[7] will be required by 2022. The government has already announced some measures towards achieving this goal, which include an interest rate subsidy for buyers.

 

[1] Garv.gov.in accessed on March 27, 2017.
[2] Mint, Govt Approves Rs2,147crore Highway Project in Uttar Pradesh, March 15, 2017.
[3] The Economic Times, Government to Execute Rs 5 lakh Crore Sagarmala Projects by May 2019, December 26, 2016.
[4] Business World, Revamping Indian Railways, March 22, 2017.
[5] Mint, How Far Has India Come in its Digitization Journey, March 10, 2017.
[6] Mint. Building India’s digital highway, January 24, 2017.
[7] Khaleej Times, NRIs take 'note' of India realty, March 24, 2017.


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

The information contained in this article is for informational and illustrative purposes only and is not intended to provide specific financial, investment, or other advice to you, and should not be acted or relied upon in that regard without seeking the advice of a professional. Particular investments or trading strategies should be evaluated relative to each individual

 

Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

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