The Indian economy has been among the major growing economies in the aftermath of the global economic slowdown, and swift infrastructure development is the key to sustain this growth momentum. Keeping in view the growing importance of the infrastructure sector, the 12th Five Year Plan has earmarked an investment of $1 tn in infrastructure. The investment in infrastructure in the country has increased from 4.9% of the Gross Domestic Product (GDP) in 2002-03 to 6% in the last fiscal year. It is expected to touch 10% of GDP in the 12th Five Year Plan (2012-17) as against 7.6% in the 11th five Year Plan Period. This would require investments by public and private sources within the country, as well as foreign investments. In support of this cause, the Reserve Bank of India is in favor of increasing the number of players in the banking industry by granting fresh licenses and allowing the foreign banks to operate in the country through subsidiaries. This will serve the twin objectives of greater financial inclusion and mobilizing resources for infrastructure sector. Further, the apex bank has asserted that, in order to generate the funding from private sources, there is a need to create capacity and foster competition in the banking space and remove barriers for development of the domestic corporate bond market.

Against this backdrop, the current issue of the journal covers issues ranging from infrastructure project appraisal by banks, impact of public spending on infrastructure and corruption, constraints of financing PPP projects in infrastructure sector, to urban transport crisis and use of indigenous technology for the development of urban roads.

The first paper, “Project Appraisal in Infrastructure Financing by Indian Banks”, by Vikas Srivastava, explores the various issues involved in the appraisal of infrastructure projects financing in general, and banks in particular. The author is of the view that, since each sub-sector of the infrastructure is inherently unique in terms of its administrative and organizational structures, the regulatory framework governing their operations, the sophistication of technologies adopted, and the degree of commercialization, the bankers also need to follow a unique credit rating mechanism with detailed sector-specific guidelines for appraisal of each project. On the other hand, following the ‘one model fits all’ credit scoring model for all infrastructure projects across the sectors, will lead to deficiency in assessment of risk rating and inappropriate pricing decision. The author suggests that banks may be encouraged to set up project finance strategic business units consisting of analysts trained with sector specific areas for appraisal which will ultimately strengthen the credit flow to different infrastructure sectors.

The second paper, “A Multilevel Analysis on the Economic Impact of Public Infrastructure and Corruption in Italian Regions”, by Gianpiero Torrisi, critically analyzes the economic impact of public spending on infrastructure, and the role of corruption in this regard. The study considers three categories of infrastructure: economic infrastructure, human capital infrastructure, and social infrastructure. The multilevel empirical analysis based on the database covering over a 10-year period from 1996 to 2006, confirms the existence of heterogeneity across Italian regions, and is also consistent with the theoretical consideration that corruption negatively affects economic performance. Public-Private-Partnership (PPP) is the need of the hour to augment the huge infrastructural gap. As the public sector alone cannot fulfill the gigantic task of providing better infrastructural facilities in urban and rural areas on physical infrastructure and social infrastructure front, the private players have to play a greater role in bridging the gap funding as well as maintaining the projects. The third paper, “Financing of PPP Infrastructure Projects in India: Constraints and Recommendations”, by Ranjan Agrawal, Aayushi Gupta and M C Gupta, examines the various constraints of private financing to different segments of infrastructure and suggests measures to mitigate the difficulties for a sustainable growth of the infrastructure sector in India.

The fourth paper, “A Study of Urban Transport Crisis of Pune City”, by B L Rajput, A L Agarwal and D Mahajan, analyzes the extent and causes of the urban transport problems faced by Pune city, and recommends select ways for improvement that would help to mitigate the problems. The urban transport crisis in Pune city is due to limited transport infrastructure, rapid sprawl development of suburban areas all round the city, rapid increase in motor vehicle ownership, and poor public transport services. The study proposes certain solutions such as, designing and construction of roads for non-motorized travelers and pedestrians, promoting use of cycles, improving public transport services, better parking facility, redesigning the route structure, better traffic management during the peak hours and imposing congestion and fuel tax.

The last paper, “Role of Indigenous Technologies in Urban Infrastructure Provision: An Evaluation of Cobblestone Roads in Dire Dawa, Ethiopia”, by Alok Tiwari, makes an assessment of the challenges and opportunities of cobblestone road construction projects in Dire Dawa. While revealing the advantages of the indigenous technology based projects, such as, creation of job opportunities, solving the problem of accessibility, utilization of local resources and skills and reducing environmental pollution, the study also throws light on the challenges faced during construction. The author opines that by converting the challenges into opportunities with effective and efficient management practices, the expected socioeconomic benefits can be achieved.

-- Pradeepta Kumar Samanta
Consulting Editor