Case Study on India China Infrastructure

A Case Study, Overcoming theme Roadblocks Are Chinese Lessons Relevant? This paper aims to document and analyse the different approaches in overall al-Qaeda vault of heaven cognitive operation for these ii very different countries from the constitution and institutional dimensions. It identifies occurrenceors that present worked in china and India. It as well as identifies some important lessons which could be relevant for forthcoming pedestal increase.For the last two decades, two India and mainland China acquire grown at twice the global rate and If this trend continues for next a couple of(prenominal) decades, with their vast labor supply, favorable demographics, and aspirations for reaching the developed world per capita income and consumption standards, these economies can be judge to find a significant imp bend on the world economy. China adopted a development model where manufacturing and exports are the rudimentary drivers of its frugal consummation.Relat ed article A. K. Kraipak CaseChinese administration recognized that export engagement and manufacturing require connectivity to the global economy and, as a result, bag development was propelled by a impregnable and sustained drive emboldened by the government. The most remarkable common factor behind the mastery of infrastructure in China was the single-minded goal of sustaining economic exploitation and recognition of the importance of infrastructure development in achieving this goal.Chinas unparalleled growth and scurvyness step-down in the last two decades has gone hand in hand with development of infrastructure stemming from its export-led outline. India, the other giant in Asia, did non follow the suit of the successful this infrastructure model in building ahead of contain. Its development strategy from time to time focused on re diffusion of wealth rather than growth. In the early 1980s, China was among the poorest nations in the world, with more(prenominal) (prenominal) than 60% of its population, or over 634 million people, living on less than $1 a day.By 1990, China reduced poverty to less than 33% and, by 2003, to 13. 4%. This was possible because of very postgraduate school growth rates fueled by craftiness openness. Indias achievements on growth and poverty during the very(prenominal) period declare been steady notwithstanding relatively modestthe overall population living on less than $1 day declined from 54. 4% in 1980 to 42. 1% and 30. 7%, respectively, in 1990 and 2003. The total fig of poor, however, endures high at over 325 million.To some extent, Indias overall performance was negatively influenced by the initial development model that emphasized import substitution and self-reliance, which was one of the contributing factors to its lack of trade openness for most of the period since independence. In the early fifties and sixties both countries had fairly convertible levels of infrastructure assets and services. Fo r example, Chinas electrical energy output at 7. 3 billion kWh in 1952 compares well up with Indias power output of 6. 3 billion kWh in 1950-51.The Indian alley network in 1950s was extensive at 400,000 kms compared to most one third that in China and both countries, about 40% of roads were paved then. Indias railway network at 53,000 kms was more than double that of China at 23,000 kms. India and China had similar numbers of telephone subscribers pic Though most Indian excogitate policies have continued to emphasize the importance of Infrastructure, they did non embrace the Chinese single-minded goal of infrastructure development, anticipating future demand and building ahead of time.Indias development model, which began with a balance between growth and distribution in the early fifties, was changed in mid-course with a greater emphasis on redistribution during the critical period of growth. A number of pro-poor programs were introduced which reduced overall fiscal space for infrastructure development, in time within infrastructure priorities, indemnity-making interests drove the overall resource allocation, for example, in the 1970s and 1980s, government emphasized development of minor(ip) irrigation and arcadian roads as part of anti-poverty programs.Employment generation by means of construction of rural roads, and ground water and minor irrigation to support food security received much higher priority compared to contend to enhance logistics to support industrial growth and improving overall economic efficiency. In five year plans a major(ip) goal was to connect all villages (with population of more than 1,500 inhabitants) with rural road network however, this was done done minimum needs program supporting employment creation and leading to waste and inefficiency.Most of the roads so created did non meet quality standards because fiscal space was not adequate to accommodate both the demand for resources for rural roads and also the conte nt driveway network which was getting congested. Even in the quality of power vault of heaven, village electrification was a priority so as to provide power for the farms, but not necessarily to households. Emphasis on connectivity, without improvements in overall economic efficiency meant unsustainable financial burden on the government budgets.In the time of slower economic growth or external shocks such as wars and high oil prices, infrastructure investings were major casualty. China with its high economic growth rates and higher nest egg rates was able to allocate much larger resources for investments in general. In the 1980, China saved 35% of GDP whereas Indias savings rate was less than half at 15. 5%. This combined, with higher fiscal deficits in India, meant that it was not always possible to invest in infrastructure pic pic schemening FrameworkInstitutions, Processes, Incentives and AccountabilityDevelopment be after in any country can follow two broad modelsit can either be an integral part of the governmental decision-making process or it can be divorced from politics where technocrats constrain a firm hold on the intend process as a matter of noetic and efficient management. In China, planning followed the first model. The State Planning Committee (SPC), and its subsequent variants, have been and remain at the center of Chinas political and economic affairs. The SPC sets the national policy agenda, makes important policy decisions, and even guides the lawmaking process to ensure that these decisions are implemented.Through a dual-track implementation arranging, its policy-making utilisation also extends to closely monitoring and guiding policy implementation. Thus the Chinese planning institutions fully integrate political economy reflections in the process of designing and implementing development plans. In China, strong accountability for delivery of plans was implant through powerful party structure and this has so far led to bet ter economic outcomes in terms of growth and infrastructure development. The Indian planning process historically tended to be more technological than political.Although the Planning Commission, with the Prime Minister as the Chairman, had some institutional ties to the political decision-making process, the process has tended to be more technical in reality, captured at times by technocrats who wanted to ensure able and managerial efficiency. The planning institutions in India at the national and state levels adopted a consultative process for the formulation of plans. Plan formulations for important sectors were to a lower place(a)taken by working groups with broad mandates and high levels of technical expertise.These working groups admitd not and representatives of the line ministries, but also financial sector, surreptitious sector, and academic institutions. This process of conjunction, however, worked well only in the initial phase of the preparation of formal plan doc uments. Most of the times, there was disconnect between targets and performance, plan and implementation, and demand for resources and actual availability of funds. As a result, in most years until recently, infrastructure projects were actually built on a piecemeal approach.Unlike the dual-track system in China, overall implementation in India has more frequently been divorced from the planning process. Similarly, policy-making too was fragmented where, for example, a number of policy reforms have been often decided by committees and working groups, without the Planning Commission always being in ill of the process of reform designs or action plans for implementation. Indias planning ability, widely regarded as world class, was not backed by underlying incentives and accountability systems in China that delivered better outcomes. Infrastructure Sector ReformsThe planning framework for infrastructure was very different in China and India. Similar to their efforts in rural geolog ical fault and agricultural modernization, China was able to adopt a dual benefit infrastructure development policyto build infrastructure that will promote economic growth and to build systems that directly target poverty reduction. The vast program of building expressways was complemented with several programs that would directly benefit the poor. Having a centralized political system with complete State control made it possible to take risks that would have been more difficult under alternate political paradigms.The political costs of direct dissent were relatively small, if not entirely lacking(p) in China. Until 1994, the Indian government did not have a comprehensive framework for infrastructure. Most of the government interventions were through large number of sector ministries and departmentsMinistry of Finance, Planning Commission, Pricing bureaus, state-owned enterprises (SOEs), etc. Since there were so many another(prenominal) actors, the entire spectrum of infrastructu re functions, namely, planning and policy making, regulation, yield, and supply tended to be dominated by public sector SOEs.The SOEs in these sectors had the skills and capabilities to influence important decisions however, accountability structures were being weakened due to excessive interference by political bosses. Reforms in the Indian electricity sector have not been very successful, in spite of the fact that these were pursued more systematically with amendment of the electric carity Act in 1991, which allowed nonpublic sector fellowship and even 100% foreign ownership. This alone did not lead to real improvements on the ground until recently.Part of the problem degrade in the lack of a credible regulator, partly due to a political setting that remained uncoordinated. The electricity sector in the Indian federal system remains on the concurrent list, implying responsibility for the sector by both the central government and the state governments. One of the most importan t factors that remained uncoordinated was the livelihood issue. A large number of states had followed the practice of subsidizing power for agriculture and, as a result, there was ambiguity regarding who was going to pay for the power.The financial status of most of the State Electricity Boards (SEB) was grim, with most experiencing large and unsustainable deficits. In the early 1990s, the rate of return on all SEBs combined was highly negative (-13. 5% of capital employed). Until 1998-99, private investments were allowed only in power generation in India. Private sector elaborateness in power transmission was allowed but private sector participation in power distribution did not occur until 2003.Although many states have set up independent regulators that have been fairly effective, the perfect issue of who pays for the subsidized power has remained an important challenge. Unlike India, however, Chinas power sector reforms have been relatively more successful in terms of the le vel of foreign and private sector participation in reducing the funding gap. The foreign private sector was welcomed into China, not only due to the need to augment financial resources, but also for the needed manufacturing expertness to produce the power generating equipment for an ambitious skill expansion program.Foreign direct investments (FDI) in China took various institutional forms such as joint ventures, build-operate-transfer (BOT) types of arrangements, candour joint ventures, loans, and equity in the alive energy enterprises. In 1996, the sector was further reformed under the new Electricity Law that created the State Power Corporation of China as an entity separate from the Ministry of Electric Power, thus signifying a first step to separating regulation from actual production and supply. Given the dual set system of new plant, new price, Chinas power sector funding gap has not been as large as that of India.A majority of farmers in China believe this TO GET RICH, BUILD roadstead FIRST TO GET RICH FAST, BUILD FAST ROADS saying. Numerous recent studies have exhibit that the greatest effect on poverty reduction can come from investments in the exaltation sector, particularly roads. It has been shown that an efficient road network increases access to services and economic opportunities, facilitates domestic market integration, lowers the cost of production and transportation, and allows healthy competition both domestically and internationally.In addition to accessibility, the quality of the roads also plays an important role in economic development. Although China had a late start, its achievement in building an extensive national road network in the last two decades has been unprecedented. With almost 30,000 km of expressways, China is fast undercover work up with the U. S. , which has the worlds largest road network. China is adding 5,000 km of expressway every year, expecting to reach a level over 80,000 km by 2020.Before discussing the c urrent state of the Indian road network, it is useful to check upon three important trends that have significantly influenced the way in which road infrastructure has been developed and utilize in recent decades. First, there has been a gradual but persistent mode shift in India from rail to roads. In 1960, rail carried 85% of goods traffic and 51% of passenger traffic by 2001, those percentages had declined to 23% and 13%, respectively. The vast majority of this demand appears to have shifted to the road system, which currently accounts for 70% of freight transport and 85% of passenger transport.Second, with rising GDP, demand for automotive and freight travel has grown rapidly and consistently. Third, despite the stunning growth in road transport demand, investment in new highway capacity has been anemic. These three trends, taken together, help explain the current state of the Indias road infrastructure, which is now both deplorably underdeveloped and over-utilized. Even thoug h the Indian road network as a whole is denser than that of China, its highway component is comparatively underdeveloped.Despite significant improvements since the establishment of the National Highway Administration of India (NHAI), in contrast, Indias existing national highway network is characterized by slow speeds, heavy congestion and low service levels. It is not only the Indian road network that has remained under-funded almost all other infrastructure services remain, at present, far below the level required to sustain the economic growth needed to address permeative poverty Important lessons learnt On Infrastructure developmentWhen it comes to roads, the important goals for future development of Indias road infrastructure are given as follows- Upgrading the capacity and efficiency of existing infrastructure. Establishing total connectivity for an all-weather rural road network Developing a modally-balanced transport system, particularly in urban areas Contributing to a reduction in regional disparities Contributing to sub-regional economic cooperation Putting a much greater emphasis on safetyIn order to perform their tasks more effectively, these national, state, and local agencies must collectively overcome a number of morphologic challenges, many of which can only be solved through policy or institutional reform. At the broadest level, the most pressing issues fall under the categories of poorly defined bureaucratic structure/mission, insufficient accountability, poor asset/system management, and inadequate resource mobilization. These categories can be broken down into greater particular proposition as followsPoorly defined bureaucratic structure/mission Unclear or overlapping responsibilities, often with no agency in charge Multiple mandates including roads, buildings, and irrigation Absence of clear strategic goals, mission statements, performance indicators, or investment plans Insufficient accountability blow to separate policy and operational roles for clear accountability Not enough consultation with road users Failure to report all relevant information Failure to impose sanctions on poor performance Absence of independent bodies to verify information and assess performance Inappropriate evaluation techniques that are merely input-based, focusing solely on accounting for expenditures against the budget. Taking into consideration the physical or operational conditions of the actual road network. Poor asset/system management understaffed attention to data collection and analysis in decision-making Excessive focus on new investment vs. maintenance Uneconomical investments made under political influence Lack of competition in procural Need for leaner staffing with greater skill-set diversification Declining investments in transport relative to GDP Input from private finance still very limited Need to make better use of user charges in the form of gas taxes or tolling Though these problems are daunt ing, agencies at various levels within the government have taken initial steps to address them in recent years. Within the central government, notable examples include Increasing the level of public funding for transportation within the Five-Year Plans Creating the Central Road Fund (CRF) to finance road development and maintenance through an earmarked cess (tax) on diesel and gasoline Operationalizing the National Highways Authority of India (NHAI) to act as an infrastructure procurer rather than a provider Establishing the National Highways Development Project (NHDP) to put forward the nationals major highway routes Amending the National Highway Act to expedite land acquisition, permit private participation in road financing, and allow for the tolling of public roads In addition to standard techniques, such as the issuance of state- and federally-backed bonds, more innovative public-private partnership arrangements have also been developed.Examples include BOTs (build-operate -transfer contracts, in which a private partnership builds and operates a facility for a fixed number of years, recouping its expenses plus a reasonable receipts through tolling, before transferring the facility back to the state) and other forms of maintenance and operations concessions. Though there is an fire recognition of the contribution of infrastructure in modern economies, the links between infrastructure and economic growth and poverty reduction is neither certain nor automatic. Infrastructure development results in improvements in productivity and in overall quality of life but the impact is still contextual.A study prepared jointly by three major development institutionsthe Asian Development Bank (ADB), Japan Bank for International Cooperation (JBIC), and the earthly concern Bank (WB)advocated that it is not enough to examine impacts of infrastructure without broadening and deepening the definition of poverty and economic growth. In the study, the impacts of infrastru cture are seen to occur at three levelsfirst, through facilitating economic growth second, through improving quality of life and, finally, through enhancing broader social and economic capabilities. Nevertheless, manufacturing and exports have proven to be key drivers to economic performance of less developed and developing countries. Infrastructure provides connections to the global economy that are all important(p) for export competitiveness and manufacturing. China used infrastructure as a policy instrument and prompt political tool to reduce poverty and trigger growth.The Chinese government had a strategic imagery that was combined with a sustained drive toward economic growth, which resulted in unprecedented growth, poverty reduction, and gains in efficiency, but at a cost of increased inequality and great regional disparity. India started with a very rational approach of maintaining a balance between growth and distribution, but changed mid-course to a greater emphasis on r edistribution. India learned the hard way that a greater emphasis on redistribution was not viable without rugged and sustained growth. The resulting consequences were limited improvements in growth and poverty reduction with relatively little impact on income distribution.