A hard Brexit? India will be a key partner for UK businesses but their infrastructure requires major improvements first
An interminable problem exists in India’s current construction industry and that is the absence of real infrastructure management and development expertise. In recent years, this has led to poor quality structures, often collapsing and the inevitable loss of life. In the current era where the country is in the process of mounting a challenge as a major economic global force, and in the wake of the creation of Smart Cities, India country cannot continue with major constructions in the absence of a strong infrastructure management and development input.
Poor infrastructure management has been the main contributor to disasters, starting with delays, sub-standard engineering methods and structural design flaws. The situation has strongly highlighted an imperative need for leadership and management skills training in order to address this problem, particularly with India’s infrastructure being expected to grow to 6.6 trillion by 2025 (PwC, 2016).
India is currently alongside China as the fastest growing economy and the momentum is set to continue with the annual growth rate in 2016 expected to be 7.1 per cent. Various British ministers have begun to sound the call for British businesses to start the process of trading with India as a major trading partner, particularly as India’s Prime Minister Narendra Mody has set up a major skills initiative for the 1.2 bn population, of which half are under the age of 24 – this being key for their economy.
As trade within the European Union may indeed result in a hard landing, India will need to be seen as a serious option and capacity building (or capacity development) is key to this end. Capacity building is a term organisations, governments or individuals use to understand the obstacles that prevent them from achieving their development goals.
Capacity building opportunities are significant, particularly in railways where 72 percent has yet to be used. In terms of road building and bridges, 65 percent is has still to be used in the 12th 5 year plan and this presents itself as a significant opportunity for private firms.
In India, the infrastructure industry is such an industry where ‘golden’ opportunities are present and ready to be seized, however, one vital constituent is missing and that is the presence of highly skilled Infrastructure and Development Managers. If new ‘Smart Cities’ are expected to generate the expected future wealth in India, infrastructure companies will be at the centre of this. Infrastructure companies are currently being presented with the potential to contribute positively to India’s new cities, thus it is therefore imperative that they firstly become aware of the facts and figures which if go unnoticed, will be a significant missed opportunity for their own wealth ambitions and that of the country.
Current and Future Infrastructure Projects in India
Ongoing projects include the Chenab River Railway Bridge to be completed in 2019 and Navi Mumbai International airport to be completed in the same year. Future projects include the $90billion Mumbai industrial corridor (generating 3 million job opportunities) and the Charanka Solar Park which will host 500MW of solar power energy and 900,000 tonnes of natural gas. There are planned expressways such as the $1.9billion 8 lane Yamuna Expressway, the Kathipura interchange flyover, and tunnels such as the Banihal-Qazigung tunnel which will reduce the travel distance between towns.
The Return on Investment (ROI) and Company Incentives
India’s infrastructure companies are heavily involved in infrastructure projects, for example, Larsen and Toubro who reported an operating profit of $152million in the quarter to December 2015 in line with the government’s effort to increase infrastructure activities. Other firms include GMR Infra, Jaypee Group, Reliance Infrastructure and Lanco Infratech. With the government seeking infrastructure investments from the private sector, they calculate that the growth rate of investment will be 17.4 percent or approximately $10 billion for roads and bridges alone (figures according to the Department of Industrial Policy and Promotion Paper - Investment Opportunities in India, 2015).
Potential for UK Infrastructure firms to participate
UK companies will initially be targeted as prospective beneficiaries and these include for example, ARUP, BAE Systems, Rolls-Royce, British Nuclear Fuels, Siemens from the UK and McNally Bharat, Electrotherm, LG Balakrishnan and Technofab Engg from India. Current infrastructure participation by private firms has grown since the initial 5 year plans began. Now at the 12th plan stage nearly half the firms come from the private sector. The chart below shows the growing participation since the 10th plan.
With increasing incentives for private firms, the growth since the 10th 5 year plan has increased to 48 percent from 22 percent. The capacity building opportunities are waiting to be filled by more private sector firms who will take advantage of the government incentives presented.
The scope for infrastructure prowess and the potential for significant profit earnings in India are evident. This process can only be addressed by the intervention of infrastructure companies firstly recognising the immense potential. The investment is not needed in fixtures and fittings, but in management and development personnel. This is the starting point. With a significant improvement in India’s infrastructure, this will be a major arena for UK businesses to take control of opportunities and soften the post Brexit ‘landing’ in order for the UK to experience new markets in a country ready to do business.
Dr. Victor Chukwuemeka
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