THE ECONOMIST AND WRITER Shankar Acharya and I are having lunch at the India International Center in Delhi, among somewhat musty but reassuring surroundings, chipped plates and barely attentive waiters. Shankar hands over his most recent book, a collection of the columns he writes for the Business Standard. I read him often, and remark that India’s infrastructure crisis has been a favorite topic of his. “Yes,” he says, smiling, “I am a killjoy. But I think that India’s growth rates have made us perhaps overly cheerful in the face of some obvious weaknesses. And somebody has to say it.”

He is right, of course. There is no escaping our infrastructure problems, even here in India’s capital city—the Delhi newspapers during my visit have been full of headlines on the city’s power outages. A single day that week, as one outraged journalist wrote, had seen “10 periods of ‘load-shedding.’”

In fact this particular bit of bureaucratspeak we use, “load-shedding,” reveals how a growing economy has found it difficult to look its crisis in the face.^bt Our bad roads and power cuts are a reminder of our prereform years—it is here that we can most clearly see the evidence of India’s old structures, the tattered vestiges of socialism in an emerging free-market economy. As a result India now presents us with a bewildering landscape—of vibrant, private enterprise choking up as it meets crumbling public infrastructure. Our tall, glass-fronted office buildings are powered by private generators, entire neighborhoods rely on private wells for water and shopping complexes, technology parks and well-run housing communities sometimes have little more than dirt roads leading up to their gates.

But it is only in the last decade that infrastructure has become a big concern for our middle class, entrepreneurs and farmers. We are far behind the United States, Europe and China on connecting the country—in the West, people refer to the Internet as the fourth big stage of infrastructure expansion, after the nineteenth-century growth of rail systems, the networking of red copper telephone lines in the early twentieth century, the road expansion in the early and mid-twentieth century, and the dramatic rise of air travel in the 1950s. In India, however, all these infrastructure expansions are only now taking place, and in parallel to one another. We have had a rail network that the British passed down, but we barely expanded it till the 1990s. Our road network was a patchy effort, with more than 80 percent of our roads narrow, unpaved tracks; our teledensity was stagnant at 0.6; and much of the rural country was in darkness, unconnected by power lines.

Only since the late 1990s has there been a spurt of growth, with new investments in infrastructure that cut across rail, road, air, telecom and the Internet. Yashwant Sinha, the finance minister under the NDA government, has remarked that all centuries coexist in India. This is certainly true of our infrastructure landscape, where everything is changing chaotically, and all at once.

All roads lead to the Empire

Imperial India’s approach to infrastructure shows up the differences between empires and democracies. For British India, infrastructure meant building roads and rail that focused on colonial requirements, rather than as responses to popular demand.

It was trade with Britain, and the ships leaving India’s ports stocked with indigo, tea, wheat and cotton that shaped infrastructure expansion in the early imperial years, and the East India Company’s focus was to get these goods moving faster through the country. For instance, the British built the Bombay to Thana rail line in 1853 after the Lancashire mill-owning community lobbied to move the transport of raw cotton from the backs of donkeys to trains. India’s ports and port cities rose to promote trade with Britain, and city roads, water supply lines and sewage systems were built mainly where the Empire’s officers lived and carried out business.

But after the 1857 revolt, security became British India’s core obsession, and it triggered a massive expansion of rail infrastructure.^bu Rail connectivity grew from zero trains in 1850 to a network spanning close to 10,500 kilometers by 1875. The rail stations around these newly laid tracks were grim, guarded buildings—virtual fortresses with security towers overlooking the stations.¹ The only thing missing were the moats. For British officers, these newly fortified cities and railway stations were protective Edens, against which “the chaos of India beats, outrageous as a sea.”² But such security imposed quite a strain on the exchequer—the railways were built at a cost of £18,000 per mile, compelling Charles Trevelyan, the then governor of Madras, to complain that India’s rail systems were “eating the British out of house and home.”

Infrastructure growth in India during this period thus came to emphasize power and control. Even the intricate rail network symbolized power and was compared to the triumphs of other empires, “surpassing the aqueducts of Rome, the pyramids of Egypt, the Great Wall of China, and the . . . mausoleums of the Great Mughals.”³

Occasionally in later years, infrastructure growth—in terms of irrigation projects and rail connectivity—did happen in response to persisting famines and droughts. But the idea that infrastructure is essential to governing—one that comes naturally to democracies—took some time to arrive in India. One of the rare instances the British attempted such a “popular project” in infrastructure was in the Punjab province when it built extensive canals that brought 4.5 million hectares under crops from 1885 to 1947.^bv Elsewhere, infrastructure as popular policy took hold only when the Congress party used local projects as patronage, to win the provincial legislatures. For that matter, connecting rural areas through roads and rail actively went against the colonial interest, since it would have allowed farmers to bypass the state and sell their crops to markets directly. What infrastructure the British put in place here were chains of powerful middlemen—a bureaucratic system of revenue officers, and below them their rural intermediaries, the local zamindars and landlords. These caged the villages and ensured a monopoly of buyers linked to the government.

Much of rural India as a result stayed unconnected throughout the colonial years, and the countryside remained static and unchanging, a world unto itself, isolated from the rest of India. The British government’s efforts to counter the growing nationalism of the early twentieth century did trigger some isolated instances of rural infrastructure investment, such as the work of the Willingdon administration, which allocated Rs 10 million for rural infrastructure and exhorted its officers to “know your villages.”

Postindependence: Out of focus

“We are making great things,” Le Corbusier, the architectural adviser to the Government of Punjab, said of India’s infrastructure efforts in 1953. “It flows as the music flows in Bach.”

Our great plans for infrastructure immediately before and after independence were seen all over the massive blueprints of the 1927 Jayakar Commission—it stressed the development of a rural road network, and the blueprint led to the Indian Roads Congress in 1930, which released its first road plan in 1943. The ambitious agenda for roads was meant to be carried out over a period of twenty years.

These early, enthusiastic plans, however, soon gathered dust. Instead, between 1950 and 1970, while passenger and goods traffic increased more than thirty-fold, road length went up only five times. The rail network increasedat less than half a percent every year in the 1950s, falling to a barely detectable growth of 0.2 percent in the 1960s and 1970s. Well into the 1980s, much of the rail network remained what India had inherited from the British—which excessively focused on Indian ports, barely skimming rural areas. The first major railway project since the British left India, the 750-kilometer Konkan Railway on India’s western coast, came up only in the 1990s.

The government was filled with good intentions when it came to infrastructure—the first five-year plan had envisioned a spate of new dams, irrigation projects and steel plants across India. It was, according to Haravu Raj Iyengar, governor of the Reserve Bank of India, a plan for change and rebuilding, “as important as the French, Russian or Chinese Revolutions.”

But India’s infrastructure vision was top-down, and the government got carried away with trying to prove to the world what India was capable of. The urgency to turn a desperately poor country into a gleaming industrial power had prompted the state to emphasize higher education over primary schools, power plants, steel factories and massive dams over rural roads, and building new cities over reforming the older urban “pestholes.”

The result was infrastructure comparable to diamonds in a paper crown. India had islands of triumphant, modern factories that towered over you unexpectedly in the midst of vast rural landscapes. The town of Kalyani, which was planned as one of India’s industrial townships, went into slow decline in the absence of highways and roads to network it effectively to cities and ports.⁴ “The government had its blind spots—it saw product markets as the main drivers of growth,” Jairam Ramesh tells me. “It didn’t really consider the gains we could make from connectivity and networks.”

The government’s growing impoverishment also dampened these plans. Government policy came adrift in the wake of India’s financial crises through the 1960s, and the government struggled to meet the bare-boned demands of “food, clothes, housing.”

But it is also impossible to ignore how the Congress party’s overwhelming, almost suffocating dominance in these years—Myron Weiner once remarked that the fondness among voters for the Congress amounted to “veneration”—affected its infrastructure investments. Spending on bridges, roads and railways is usually a big way for parties to build popular support—they are political investments and great voter-bait. But in the first two decades the Congress party could instead coast on its organizational prowess and its links to the independence movement. This in turn allowed the government to prioritize the projects that appealed to it ideologically, which were mainly more industrial investments and new city development. Infrastructure for villages and rural India in general also suffered from the antimodernity views of some of India’s leaders. For instance, Gandhi had viewed British rail systems as responsible for “India’s greed.” He wrote, “I am not aiming at destroying railways . . . though I would certainly welcome their natural destruction.” Gandhi’s logic provided a foil to politicians slow at providing their constituents with essential services—water, electricity and roads.

“We’ve had a nirvana of anarchy in infrastructure,” is how Shankar Acharya puts it. “It’s where we need the government the most, but where our government has been present the least.”

Indira Gandhi in particular killed any pretense of an infrastructure policy in her years as prime minister. In its place, she took up a strategy of intensive, ramped-up subsidies—in food, fuel, electricity, loan waivers—which elbowed out investments in more universal public goods such as hospitals, roads and railways.⁵ This has also set off an enduring political tradition in India. Subsidies are always tempting—they guarantee instant payoffs for governments, and this has been especially true since the 1980s, when Indian politics became more turbulent. As the economist Sumir Lal pointed out, India since then has remained in “perpetual election mode, as every year one or more major states face the voters.” And infrastructure projects, where political dividends take time to mature, are unsuited for such chaos.

Instead, short-horizon Indian governments have favored short-horizon initiatives, expanding subsidy policies and freebies that have an immediate, big bang in PR, even if the real effect is a whimper. For most governments, investments in infrastructure were anyway a lose-lose option: the often zero tariffs in power and incredibly low user charges for road transport and railways meant that when it came to such projects the more the state built the more it lost. And with governments so unstable, it was likely that the next government would take credit for what you did.

Indira’s years as prime minister also left us with another legacy. Her paranoia—both real and imaginary—over threats to her power compelled her to stack the public sector, including infrastructure institutions, with her acolytes.⁶ The politicization of infrastructure providers killed the morale of lower administration across the sector; the bureaucracy here was increasingly filled with cynical officers who had one eyebrow cocked and one hand extended out. The writer and bureaucrat S. K. Das quotes the words of Kautilya’s Arthashastra while describing the ethic of these officers handling public works: “Just as it is not possible not to taste honey . . . when placed on the surface of the tongue, so it is not possible for one dealing with the money of the king not to taste the money in however small a quantity.”

Infrastructure policy was thus caught in the maw of bureaucrats and contractors who circled the wagons when it came to executing projects. Das notes that bureaucrats regularly handed over road contracts to contractors unable to execute them, and in terms of “leakage” the funds allocated were sand through fingers. And the dilapidated, delayed projects—roads that were obstacle courses, half-built bridges that soared up like stunted children, water pipelines that were laid down and dug up again—were awarded and re-awarded to different contractors in a game of musical chairs. The looting of raw materials, disappearing funds and bureaucratic apathy meant that flats that the Delhi Development Authority (DDA), the government body meant to manage the city’s development, built would crumble a few years after construction. Large-scale rural infrastructure schemes such as the “million wells project” saw across districts the same well being dug in the same spot over and over as the funds flowed in. The Rajiv Gandhi drinking water scheme, after twenty years and billions of rupees spent, had the same percentage of villages as before—twenty—unconnected to drinking water supplies.

The infrastructure shortages that were emerging across the country also made it a prize to be doled out to favored constituencies. Infrastructure bodies as far down as water and road committees for villages and city wards were caught up in these bounty politics. In the rural areas, villagers fought desperately for frugal resources—a water pump or an electricity line—to be installed within the areas their own communities dominated.⁷ James Manor has noted that this also led to the rise of “fixers,” especially in rural areas, a vast network of middlemen with political ambitions of their own who lobbied on behalf of the villagers with state legislators for favors, such as water and electricity lines and small-scale irrigation projects.

The lay of the land

“When you talk about building highways, canals and rail in a country like India,” Vinayak Chatterjee says, “you come up against a big constraint—land.” Vinayak heads the consultancy Feedback Ventures Ltd and has years of experience working with the government and private sector on infrastructure issues.

Land has been an especially charged concern in our politics. The 1950s and 1960s land reforms had failed across most of the country with the exception of Kerala and West Bengal. The landowning zamindars were politically powerful, and in most states the loopholes in the legislation had made the reforms largely impotent. At the same time, rent control policies imposed massive restrictions on urban land, taking it off the market. The 1950s controls around land markets only grew worse when Indira introduced land ceilings and limits on the height of buildings in the mid-1970s. These laws, as Vinayak notes, single-handedly exacerbated overcrowding and lack of urban space in India several times over. By the mid-1980s, India had the highest percentage of population in the world unable to afford housing, and a growing number of landless poor were improvising their own houses out of bits of cardboard, tin and plastic on illegal land.

Land shortages and the rapid rise of illegal settlements also dragged proposed infrastructure projects into quarrels over property. The fallout of this was that in 1983 the DDA was receiving land for development that the government had notified for acquisition in 1956. The illegal, mass settlements on public lands gave immense leverage to politicians with a taste and talent for populism. Arjun Singh, the Madhya Pradesh chief minister in the early 1980s, manipulated the politics of illegal housing by handing out “pattas” or land rights to illegal settlements, giving his political image a pro-poor patina. Other governments, such as A. R. Antulay’s in Maharashtra in 1991, dived off the opposite end, executing “Operation Eviction,” which transported thousands of slum dwellers in trucks and dumped them in places far off from their homes. Such cycles of pandering and eviction from one election to the other have been visible across our cities and towns.

Slow steps

Dr. N. Seshagiri describes the politics of infrastructure in India that emerged by the 1980s as a case of “ten quarreling men holding each other’s bits of hair, and no one is willing to either pull or let go.” The gridlock brought new public construction to a virtual standstill. By the 1980s the shortfall in infrastructure across India was intense, public-sector enterprises in railways and power were veering close to bankruptcy and the Congress party remarked that these shortages were having “a crippling effect on production in numerous industries.”

Some change did begin to occur with the sixth five-year plan in 1980, which was essentially a “power, coal and transport plan.”⁸ During this period an idea—supported by the success of the green revolution—began to take hold in the government: if the state focused on building the foundations and the infrastructure of the economy, the private sector would take care of growth. The national highways across India were built under this plan, and the government made new investments in the power sector. By the mid- 1980s, the Rajiv Gandhi government was straining against the leash to address the infrastructure crisis. But, Dr. Seshagiri tells me, some gaps seemed unbridgeable. “We soon saw the distance that existed between what was needed and what was possible for us.” Long-existing holes in roads, railways, power had to be plugged, but wider and bolder reforms that the government needed to enable this were out of bounds for a government limited by capital—in both money and political support. The government ended up doing little in traditional infrastructure sectors such as roads and railways, but took steps to improve connectivity and access in areas such as telecom. With the advent of Sam Pitroda’s telephone exchanges, PCO/STD community phone booths became ubiquitous across much of urban India. The computerization of railways was another effort the government made to reform infrastructure indirectly, without upsetting the reigning power equations and the hold of the bureaucracy.

Captain Gopinath, the founder of Air Deccan, India’s first low-cost airline, has had a colorful life—after his stint in the army, he lived in a tent for a year on a patch of barren land he was trying to farm on, then tried his hand at growing silkworms, and eventually won awards for his eco-friendly agricultural practices. But he met his match when he went to Delhi to get an aviation license, and walked into a maze of red tape. “Our push toward better infrastructure,” he says, “could have been much faster and more intensive. We lost too many hours sitting in Delhi offices waiting for permits, submitting project proposals and getting rejected.”

The 1991 reforms have been seen as a silver line for India, one that has separated the old country from the new. But there was no clean break in ideology when it came to India’s infrastructure sector. Infrastructure actually touched a new low in the postreform period. The focus during these years was on rapidly expanding the role of private enterprise, including in infrastructure—it was a thirst long denied, and it had to be slaked. In the eighth five-year plan (1992- 97), the government drastically cut back its own investments, leaving the glass half empty in the hope that private funds would pour in.⁹

But the money failed to arrive. Even as government spending in roads and ports fell in the late 1990s, businesses remained wary of entering the sector, and private investment in infrastructure hovered at less than 1 percent. At the end of the eighth plan period, the addition to power generation capacity was a little more than half of the target, and India’s roads and ports remained in deep disrepair. The fallout of this was evident—even as industry exploded, cities and towns have lagged badly in keeping up with the growing demand for roads and power. Rural India has remained sparsely connected even as new entrepreneurs began to target the rural market. Through the 1990s and 2000s, the delays in highway and flyover constructions alone exceeded the total planned duration of the project. A major flyover project in Bangalore—connecting Koramangala, HAL and Indiranagar, which finally opened in 2007—sat half-completed for more than two years, its iron skeleton exposed and rusting, surrounded by piles of debris, and a half-built road that rose up on pillars and ended mid-air.

Corruption in public works and awarding contracts has played its part here, but another big reason for our dismal showing is that Indian governments have failed to take into account the problems with private investment in public goods. Infrastructure investment has been a roller coaster of policy in most countries, as when Britain nationalized its utilities in the 1940s, but later reversed it and introduced private but regulated systems in the 1970s and 1980s. France has also experimented with private provisions for urban systems, even while it nationalized electricity, telephone and water. In Latin America, private investments since the 1980s have sometimes succeeded, and sometimes failed spectacularly.¹⁰

Markets do not work as well in infrastructure, and this springs from the nature of public goods—which are “expensive, durable, and immobile.”¹¹ This makes private infrastructure players vulnerable—after all a company cannot recall a road if it proves to be a loss. And because of this, governments may be tempted to break promises with companies by reneging on the terms of public-private partnership or forcing them to lower tariffs.¹²

On the other hand, it is also incredibly easy for private infrastructure companies to become monopolies—since the idea of competing rail or road systems is pretty impractical. This makes both independent regulators and clear, transparent guidelines around public-private partnerships critical pieces in infrastructure reform, both of which were missing in our postreform economy. Their absence led to the unmitigated mess in the private infrastructure projects that were signed in the early 1990s, such as the independent power projects of Enron in Maharashtra and Cogentrix in Karnataka, all of which got mired in problems of transparency, costs and, as one infrastructure expert delicately put it, “ministerial preferences.”

Untying the knots

“Sunil Mittal of Bharti Airtel says that people use their mobile phones the most when they are in a traffic jam,” one entrepreneur tells me. “So the fact that telecom is far ahead of the rest of India’s infrastructure has brought him a lot of revenue!”

The telecom sector, which has emerged as Indian infrastructure’s poster boy, has seen quite a transformation in the last decade. The change did not come all at once—the Indian government loosened the strings on telecom policy with some reluctance. “The first policy changes were around mobile telephony in 1993, but they were quite half-hearted,” says Rajeev Chandrashekhar, former chairman of BPL Mobile and currently a Member of Parliament. The regulations allowed a limited number of mobile phone operators to do business, but the licenses carved out particular regions for each of them, constraining both scalability and competition. Rajeev notes that despite these restrictions, both Indian and foreign entrepreneurs immediately recognized the sector’s promise, and the bidding was fierce. “Everybody and his uncle wanted a telecom license to operate in India.” The following years, however, were a hard slog. “We hardly saw any growth for a long time,” Rajeev says. “To make things worse, the rupee devalued by over 10 percent in 1995, at a time we were importing all our equipment. Interest rates went through the roof, to 19 percent. We had to charge for even incoming calls, so pretty much no one wanted our mobile services.”

The government, focused more on retaining control, had yet to recognize the potential of the sector. People still saw mobile phones as an elite product, something the masses could not afford. The idea that there might be something bigger in the market dawned only in 1995, when a major Indian telecom entrepreneur sold off his license for Rs 5 billion. The size of the sale created a “just a minute” moment for the Indian government. “They realized that they were sitting on a gold mine, a sector which could bring the state a lot of revenue,” Rajeev says. The state expanded the market to twenty licenses across the country. The idea of having national operators, however, still did not catch on, and the costs of doing business stayed discouraging. “The inertia was frustrating,” Rajeev says. “Our growth came to a dead halt.”

It was the 1999 reforms that gave a shot in the arm for telecom—the new policy that the NDA government pushed through broke down the fences, allowing carriers to embark on national coverage and compete across regional circles. It triggered a fever of building—of new transmission towers and the laying of fiber cables across the country. The telecom expenditure per person in rural areas alone was Rs 44 in 1999, up from Rs 14 in 1993. The explosion of private players has led to what has become the most rapid and sustained expansion in teledensity in the world, and we have a network that now covers close to half of India’s population.

One critical step in telecom reform was the government’s appointment of an independent regulator, the Telecom Regulatory Authority of India (TRAI) in 1997. It clarified the rules of play, made allocation of spectrum more transparent and resolved a key conflict of interest by removing the government from the role of both player and police—of being the operator as well as regulator in the sector. Telecom still faces some policy kinks in the transparency in allocating spectrum to market players and squabbles over regulatory independence. Nonetheless, reforms here are years ahead of other infrastructure sectors. As the Planning Commission adviser Gajanan Haldea notes, the very existence of an independent regulator is a major step that other infrastructure sectors have yet to take. The National Highway Authority of India (NHAI) in roads, the Indian Railways and the Airports Authority of India all operate and regulate the sector, and this tilt in favor of the public competitor has discouraged companies from diving in.

Turning points and missing pieces

But it is only since the late 1990s that the popular demand for better infrastructure became more strident. The rapid growth of markets across the country triggered this, as people across income classes and states attempting to participate in India’s surging economy found themselves facing massive bottlenecks in roads, railways and power. “As markets grew, people were clamoring to access them effectively, and angry at the long queues, traffic breakdowns and power failures everywhere,” Ramesh Ramanathan tells me. “In the villages, people would call up the market and get an excellent price for their produce, but the lack of a road meant that fruits and vegetables would spoil, and delays hurt their ability to bargain. These issues have created a big spike in demand for roads, telephones and better connectivity from the villages and the rural areas.”

In the cities, the rise of the middle class (who for the first time in India were educated as well as increasingly wealthy, engaged consumers) helped sharpen the focus on India’s hopelessly dilapidated urban infrastructure. “The consuming class noticed that they could buy a house, but they didn’t have sewage or water connections, or garbage disposal systems,” Ramesh says. If they bought a car, they had to drive it on terrible roads, and if they chose to walk, they found they could easily fall into an open storm drain or a random hole in the sidewalk that had been gouged open to lay pipes and then forgotten. The people in the city were living in an environment where the front end of private goods had largely fallen into place, while the support infrastructure at the back end—transport, water, power—was in a shambles, full of ominous creaks and missing pieces.

This same demand for infrastructure from two audiences, rural and urban, that rarely echoed each other, gathered steam through the 1990s. It made politicians sit up and take notice. The political support for infrastructure got a boost under the NDA government, whose prime minister, Vajpayee, had a penchant for announcing infrastructure projects with poetic flourishes at Independence Day events. “Vajpayee made infrastructure politically fashionable, something that it had never been before,” Vinayak says.

The expansion in infrastructure had another big impetus. There were growing security concerns in India at the time, owing to the sanctions the United Nations had imposed on India following its nuclear tests. The government wanted to minimize the bottlenecks that throttled growth, since the world, they feared, would be much less willing to help out in case of a fiscal or economic crisis. Additionally, transport and power inefficiencies were also a risk in the light of a security threat from Pakistan, a country with which the NDA government had a tense relationship. In this sense, Eisenhower and Vajpayee were statesmen separated by decades and geography, but strategically on the same page.

“Vajpayee saw how infrastructure could be a unifying force,” Sudheendra Kulkarni says, “and that is how he pitched it in his speeches.” When I meet Sudheendra, I experience that jolt of meeting people you knew in college many years later—of having to face the truth of their aging and yours. His face is still familiar and mostly unchanged, but he is plumper and the thatch of hair I remember is missing. He is an IIT contemporary of mine, who has traveled across the political spectrum in his career—he shaped his early political views with the works of Karl Marx and Lenin but now works with the BJP. He tells me that Vajpayee was fascinated with what infrastructure development could symbolize for the government. The prime minister announced his Golden Quadrilateral project in 1998 and portrayed it as a way to “join the four corners of India” by widening and laying thirteen thousand kilometers of highways in a planned span of fifteen years. The addition to road length since the initiation of the project has been almost equal to what India achieved in the first forty-four years of independence.

“It became Vajpayee’s signature style to pump up each major speech with a new infrastructure project,” Vinayak says. The government’s focus on infrastructure continued with the National Telecom Policy, the Pradhan Mantri Gram Sadak Yojana (the prime minister’s village road scheme) to connect villages with rural roads, the “garland of ports” or a “Sagar Mala” to improve port infrastructure, and a scheme for interlinking India’s rivers to resolve regional droughts.^bw A 1997 law also transferred the management of all surface irrigation systems to local farmers, who found themselves included in water users’ associations for the first time ever. The Electricity Act—which had long languished in the Parliamentary Committee, the place where unfavored bills went to die—was finally passed in 2003. This was a landmark for power infrastructure, bringing competition in distribution, issuing standards of performance, including financial penalties payable to customers.

Another key innovation of the NDA government was the highway cess consumers paid on all fuel to fund the national highways. This created a separate revenue stream for the NHAI to build roads. The UPA government used a similar strategy when it levied a cess on air travel to support airport development. The change in political sentiments toward infrastructure has also been obvious across states—a number of state governments, for instance, approved power sector reform, from the AIADMK-led government in Tamil Nadu to Amarinder Singh’s government in Punjab. Election promises have moved from the roti, kapda, makan (food, clothes, shelter) rhetoric of the 1970s to slogans around infrastructure. Across state elections in Rajasthan and Chhattisgarh, parties have won on infrastructure promises, particularly on what legislators have called the “BSP” promise—bijli, sadak, pani (electricity, roads, water).

The demand from voters for better roads and ports has only intensified with the pressures of India’s markets—from export-oriented industries, which are growing at annual rates of 20 percent—and with the rise of manufacturing firms that have found their cost competitiveness compromised by delays and costly electricity, water and transport systems.

The emphasis on infrastructure has therefore continued despite the change in power at the center to the rainbow coalition that is the UPA government. Prime Minister Manmohan Singh placed infrastructure among the saat sutras or seven aspects essential for growth and, à la Vajpayee, announces major infrastructure projects on Independence Day, such as the Bharat Nirman (renew India) scheme to irrigate 10 million hectares of land and provide electricity to 25 million houses.

An especially telling trend has been the new willingness of different parties to continue the infrastructure schemes of previous governments—as in the Golden Quadrilateral project, which the UPA government embraced as its own. Both the NDA and UPA governments have also attempted to address the delicate issue of land for infrastructure with bills to amend the one-hundred-year-old land acquisition act to ease up land purchases.

Interesting changes have also occurred in the aviation sector under the UPA government, through reforms brought in by the man once known as Vidarbha city’s Beedi King, the civil aviation minister Praful Patel. Praful, always impeccably dressed, his designer sunglasses placed casually on his desk, is brimming with ideas, and spins quite a vision for air travel when I meet him at his office. “Infrastructure growth has happened more by default than by design in our country,” he tells me. “We build a flyover only when our roads are completely jammed, and people are agitating for it.” In fact, in his first days as the aviation minister, Praful attempted to trigger a similar out-pouring of demand for better air infrastructure. “Our private airlines had to get permissions from the government each time they wanted to buy a plane,” he says. “I gave each airline in-principle approval to buy up to five hundred aircraft.” The surge in airplanes created immense pressures on ground infrastructure and airport capacity—in 2007 India’s airports handled ninety million passengers, up from fifteen million in 2004. The rapid growth turned India’s airports into a major bottleneck and made them notorious for their crowded lounges and serpentine queues. There were even several cases of cranky, exhausted passengers getting into scuffles with front-line staff over delays. This helped push forward airport reforms. “When airport reform became demand-led,” Praful says, “the strikes against these policies were met with little sympathy.” The reforms included the revamping of Delhi and Bombay airports, after which they will be able to handle more than twice the passengers they could before—40 million in the Bombay airport and 37 million in Delhi. “We are also modernizing fifty nonmetro airports,” Praful tells me, “and we have gone from fifty airports to eighty across the country. My vision is for five hundred airports.” The recent rise in ticket prices, however, has probably tempered Praful’s hopes. This industry is now seeing a slide in revenues and traffic. High fuel costs and heavy taxes have discouraged fliers—it is a repeat of the pre-1999 telecom approach in how the government has limited the rise of a still fledgling industry.

An important trigger for the sector’s early growth was Air Deccan, the budget airline Captain Gopinath launched, which transformed flying in India (at least for a time, before airline and fuel taxes soared) into a reasonable and affordable choice for a growing number of Indians. “Our idea was that planes were not just for the politicians and businessmen,” Gopinath tells me. “A great moment for me was when C. K. Prahalad called me from the Delhi airport and told me that he had just seen a group of tribal women carrying mattresses climbing on my flight.” The entry of Air Deccan also rapidly expanded the routes that planes could ply—Gopinath, on examining survey maps from the 1930s, found more than 500 abandoned airfields across the country, and some of these have since been developed into airports, such as in the town of Tuticorin. “We are also planning new airports in Navi Mumbai, Pune, Goa and Nagpur,” Praful tells me.

In railways as well, the UPA government oversaw a transformation helmed by Laloo Prasad Yadav, the RJD minister who played up his rustic, son-of-the-soil image into a powerful, effective electoral strategy in his state for nearly two decades. The fact that Laloo—a minister who defined the essence of his reform measures as, “The Railways is like a cow, you need to milk it well”—has focused on improving rail infrastructure is a potent sign of its broad appeal today. Sudhir Kumar, secretary to the railways minister, notes that the sector, which was written off as “a debt trap in the terminal stages” in 2001, had nearly doubled its operating margin by 2007 and had profits of Rs 250 billion in 2007-8, even as it has started running more trains and expanded the scope of public-private partnerships. That the Indian Railways—India’s oldest infrastructure and the one most deeply rooted in its old systems, way of working and labyrinthine regulations—is adapting to market realities is probably our most telling sign of change.

Gathering steam

I have often heard of China being referred to as a “nation on steroids” thanks to its rapid and dramatic infrastructure growth. While in India it seems a big deal that in just two years we have doubled the share of infrastructure investment in the Indian budget to 4 percent, China spends roughly three times as much, as a percentage of GDP.

Our impromptu, rough-and-tumble economy is groping its way toward better infrastructure in a demand-driven, “grow first, build later” model, in direct contrast to China’s slickly top-down, supply-driven approach. However, we are finally beginning to see some glimmers of coherence, as sectors such as telecom, and increasingly road, rail and aviation, see new growth. “Even with the glitches,” Vineet Agarwal, CEO of Transport Corporation of India, says, “the new Golden Quadrilateral highways have made a big difference. Where we used to take three days in travel time, we now take one.” Vineet, whose father started the Transport Corporation of India in the 1950s out of nothing more than a one-room office and an optimistic company name, has seen his business grow more profitably since 2000 than ever before, thanks to the slow smoothing out of bottlenecks. We can now even claim outright success stories here—such as the Delhi Metro, the best-run mass-transit system in South Asia, executed ahead of schedule and on budget. The metro is serving as a new bar of execution for other mass-transit systems across Indian states, and state ministers with mass-transit systems in the works make it a point to visit it and pose for photo-ops while riding the rails.

That infrastructure has become one of those concerns that is both rural and urban has not just made it impossible for politicians to ignore it but is also making the connections between the city and the village far more apparent. It is becoming less fashionable, and it does not work as well politically, to dismiss urban India in favor of the village, and to frame the country’s identity as a mainly rural one. It is increasingly obvious that what we need instead are well-connected states that diminish the distance between the two—the vitality of both the city and the village hinges on our infrastructure. Productivity in rural India will only improve with stronger supply chains and multiple ways to connect people, both within rural India and with urban areas. So far, India, and particularly the countryside, has not yet experienced the immense productivity gains that will emerge from the “network effect” of being well connected to markets through telecom, roads and rail. To date, our policy makers have underestimated the impact of building these connections. But as India’s fishermen who use mobile phones and farmers who use Internet kiosks have shown, giving people multiple means of connectivity can trigger a level of economic growth that we have so far underplayed.

From how talk around roads, rail and power is changing, it is obvious that the new focus on infrastructure is here to stay. The UPA government stated its plan to raise infrastructure spends to 8 percent of GDP, and the finance minister P. Chidambaram termed this as “simply essential” to meeting India’s growth targets. The eleventh plan in particular, in the words of Manmohan Singh, has aimed to be “historic” in its focus on infrastructure. And increasingly, the hope for infrastructure in India resides in partnerships with the private sector, which will provide one fourth of the planned $500 billion in infrastructure investment over the next few years. We are seeing what Montek Singh Ahluwalia calls “private funds for public infrastructure rather than public funds for private infrastructure.”

The government’s efforts to better define contracting and outsourcing norms have also triggered new public-private partnerships based on the build-operate-transfer (BOT) and build-own-operate-transfer (BOOT) models in roads, railways and airports. These are bringing new efficiency and completion standards for projects. Crucially, the government has also agreed to let market realities decide in issues such as toll rates for roads. The state’s budget has also provided for viability gap funding for some projects and waived import duties on building equipment.

Other incentives to change are piling up. Competition among states to attract the private sector has compelled them to look twice at the state of their roads and power. Karnataka, for instance, began ramping up investment in infrastructure when Andhra Pradesh emerged as a rival for new business investment. Narayana Murthy sees such competition as having made a big difference—in 2000 he had found working with the Karnataka government in his role as chairman of the Bangalore International Airport Limited project a deeply fraught affair. “Even though government ownership in the project was 26 percent, they acted like majority partners,” he says, “and they were highly suspicious of the private sector.” Now, however, he notes, “working with the state on such projects has become much easier.”

One major weakness of the states has also, somewhat perversely, become an advantage for infrastructure reform—their precarious fiscal situation. Through the 1990s, many of the largest states were waist deep in red ink and met their expenditures by cycling debts or evading payments altogether. Their finances became so shaky that most, as the economist Steven Wilkinson notes, failed to fund the pensions promised to their retirees (to the point that many filed court cases against the state) and had resorted to borrowing from provident funds.¹³

This meant that these states could not even maintain existing infrastructure. What money they did have to spare they directed toward subsidies—an addiction that grew steadily worse through the 1990s. Financially on the brink, the state governments have been forced to look toward the private sector for infrastructure investment. (This, ironically, has also allowed these governments to keep high-rolling their subsidies.) Private sector participation can have especially large benefits in the sectors where governments are experiencing their worst losses—such as power, where public enterprises are veering toward bankruptcy due to freebies and power tariffs much below their costs.