There is a strong case for continuing large-scale construction and infrastructure projects where there is good capacity to control the spread of infections.
On March 24, 2020, with little known about the method of infection, prevention, control and cure for the disease, India announced a nationwide lockdown of 21 days that eventually lasted until May 31, 2020, before ending in stages. Cost of that lockdown was steep but necessary. But it became apparent as we learnt more about the virus and its behaviour that a hyper-local approach to control the spread of the infection could be equally if not more effective while having far less impact on economic activity and livelihoods than a countrywide lockdown.
By the end of the first wave it was apparent that in this vast and diverse country, different states were at very different stages of the pandemic, their state of preparedness, and their balance between lives and livelihoods. Forcing enterprises that were located in unaffected districts to close was an inferior option to letting states determine their local strategies for dealing with the virus.
The double-digit growth of bank deposits compared to less than 5% growth in non-food credit from commercial banks reflects weak demand sentiments. Capacity utilisation in industry is still at less than 70%, far below the 80% threshold believed to trigger a self-reinforcing virtuous investment cycle. Growth impulses from cash transfers, which are not substantial and prolonged, would be short-lived, leaving India with even higher general government debt without any sustainable benefits.
India instead eschewed the path of reckless fiscal expansion and chose to focus on improving the productive capacity of the economy through expenditures on sectors with relatively higher economic multiplier impact and employment generation potential that will also make India’s economy more globally competitive.
Construction of infrastructure and real estate create about five times the jobs for the money spent relative to the number of jobs generated per unit of investment in other sectors of the economy. The largest enterprises in these sectors have the capacity to minimise the spread of infections among their workforce. To support economic growth by improving India’s global competitiveness in manufacturing and services and generating livelihoods, it would be advisable to accelerate investment in infrastructure, logistics and improve the building stock in the country including the rejuvenation and regeneration of urban space.
The argument that the resources for construction or infrastructure can just be alternately invested in hospitals is fallacious. India definitely needs more and better hospitals. But these outlays have to go hand in hand with the much slower cycle of producing the required number of health service professionals. It is worth noting that the government has accorded special attention to the healthcare sector, increasing overall outlay to health and wellbeing by more than 135% over last year. Since 2014, the number of AIIMS campuses have grown 267% from six to 22, medical colleges have grown 48% from 381 to 565, with undergraduate seats growing 58% from 54,348 to 85,726 and postgraduate seats growing 80% from 30,191 to 54,275. The pace of expansion of numbers of healthcare professionals is unprecedented in the country’s history.
The argument that construction or infrastructure spending takes away from providing for oxygen, drugs or vaccinations, is also fallacious. There is unspent allocation reflecting bottlenecks including supply, coordination, and execution at various levels.
Last October for example, the Centre ordered 162 oxygen plants for public health facilities in states to be delivered in 2020 although daily infections were already declining. By mid-April only 33 were installed, but the initial orders were more than tripled last month. Clearly the constraints are other than financial resources. It is worth re-emphasising that measures to counter the pandemic have not faced even the slightest financial constraint at any point of time.
Assertions that the redevelopment of the Central Vista of New Delhi is taking away resources from pressing concerns like healthcare and pollution for a vanity project are therefore misplaced and indeed mal-intentioned. The project for the redevelopment of urban spaces in Delhi started well before the start of the pandemic. To slow down these projects midway or stop them completely, when the economy needs the jobs and demand created by these public expenditures, would indeed be a travesty. This is especially true when well-reputed companies, which are in charge of these projects, have the demonstrated capacity to minimise the spread of infections.
The consolidation of central ministries and departments in a single location will surely improve the functioning efficiency of and between the currently disparately spread central government ministries. By better connecting the offices to shared transportation at high frequency will save time, reduce road congestion, and lower pollution. Those who visit the various bhawans today realise these buildings are well past their expiry date, especially if one takes into account the needs for energy efficiency and need for ergonomically designed work spaces. Most of these office buildings have over the years become a patchwork of ugly retrofitting and extensions.
Efforts to slow the pace of re-acceleration in infections and addressing the fallout, are taking the attention of the whole of the government. Simultaneously, timely completion of infrastructure and building projects in India will go a long way in bringing down India’s cost of capital, recycle capital faster, and accelerate the pace of growth and employment generation of our economy. Continuing infrastructure and large building projects along with maintaining appropriate measures to prevent the spread of infections will help return our economy to health earlier.
The Author is
Vice-chairman, Niti Aayog