Date: 19/04/2023

Relevance: GS-3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Key Phrases: Roads, Infrastructure Development, Economic Growth, Highway Construction, Ease of Doing Business, Public Expenditure, Logistical Costs, Bengaluru-Mysuru Expressway.

Context

• As India approaches national elections, there has been an increase in public spending aimed at supporting economic growth through infrastructure development.

Key Highlights:

• The government is focused on building up the country's infrastructure to boost income levels.
  • One key area of focus is highway construction, with the aim of building a record 45 km of highways daily on average in 2023-24, which would amount to 16,000 km for the year.
• This target surpasses the previous high of 13,298 km achieved in 2020-21, with a daily rate of 36.4km.
  • In 2021-22 and 2022-23, the daily rates slowed to 29 km and 24 km respectively.
• However, with the Covid-19 pandemic behind us, the Union Ministry of Road Transport and Highways, is now prepared to accelerate efforts to achieve these ambitious targets
  • Strengthening transport infrastructure is critical to India's growth in the years ahead, making this focus on highway construction commendable.

Breaking Down Highway Construction's Economic Impact

• A major concern has been the velocity at which each rupee of public spending circulates to generate income.
• One solution is to prioritize road projects that create employment opportunities, especially for lower-income households that are more likely to spend their earnings quickly.
  • When these projects cover large areas of the country, they can have a wide-reaching stimulatory effect.
• In addition, the highway network is expected to contribute significantly to India's Gati Shakti initiative, which aims to improve the efficiency of freight transportation and lower logistical expenses.

Reducing Logistic Costs to Boost Economic Growth

• By the ministry’s ambition, if all goes well, Indian expenses on logistics would account for no more than 9% of GDP by the end of 2024, down from a current estimate of about 16%.
• Such a sharp drop so swiftly sounds quite unrealistic, but it is still a target worth pursuing aggressively for several reasons.
  • First, logistics cost reduction would lead to higher profits for e-commerce companies and other players in the supply chain, which would boost consumer demand, contributing to increased economic activity.
• Additionally, the decrease in logistics costs would create an enabling environment for the smooth functioning of freight movement, contributing to the growth of the industrial sector as new firms are created and existing firms start expanding their operations.

Role of Highways in Global Value Chains

• To keep up with the industrialized world and improve our chances of integrating with global value chains, India must eliminate slow and inefficient transportation.
• Businesses in India cannot afford to be held back by capital tied up in sluggish transit and lengthy delivery schedules if they wish to compete internationally.
• Currently, India’s shipment of goods is lagging behind our export of services, but if we aim to reach $1 trillion in both categories by 2030, India needs to ensure that industrial inputs can move freely throughout the country and goods can reach ports quickly and affordably.

Drawing on Lessons from the US Approach

• The Union Ministry of Road Transport and Highways has referred to a quote by former US President John F. Kennedy on the significance of highways multiple times.
  • Kennedy once said, "American roads are not good because America is rich, but America is rich because American roads are good."
  • In the 1950s, the US undertook a massive initiative to connect the country, laying the foundation for its economic growth.
• While India's path to development differs from that of the US, the overarching idea remains relevant if we effectively utilize our road network.
  • With Gati Shakti, the government is now overseeing a range of infrastructure projects, including railways, raising hopes of efficient development without the typical delays and cost overruns.

Challenges in Highway Construction's Implementation

• Naturally, there are potential obstacles that could disrupt the smooth implementation of highway construction.
  • Moreover, quality should not be compromised for the sake of speed.
  • As it has been seen with the new Bengaluru-Mysuru expressway, substandard work becomes evident quickly.
• Furthermore, the current roads are in extremely poor condition. As major contracts are awarded, regular maintenance must not be neglected. Even if the ambitious target for this year is met, there is still a long way to go.

Conclusion

• Highway construction is crucial for India's economic growth, generating employment opportunities and facilitating global market integration.
  • However, inadequate infrastructure has hindered economic progress, making the government's focus on infrastructure development critical.
• Despite ambitious targets, potential obstacles and project quality must be addressed to ensure the success of the Gati Shakti initiative.
• To unlock India's potential for robust economic growth and development, the government must commit to infrastructure development while providing public goods and services that complement highway construction.

Source: Live-Mint

Mains Question:

Q. Explain the role of highway construction in India's economic growth and development. Evaluate the Government's GatiShakti initiative and its potential to reduce logistics costs and improve India's global competitiveness. (250 words).