Wednesday, April 17, 2013

Road to Growth or to Nowhere ??

The road ministry plans to award at least 7,300 kilometres of national highways this financial year. It has fixed an internal target of 9,000 km, which is a tad more ambitious than last year’s revised target of 8,800 kilometres. This is great news as this might be the much awaited trigger for the economy to grow again. Such investments in road construction are sure to trigger all round economic activity with everything from cement, Iron & Steel, Capital equipment industry to services to labour markets getting a boost.

But wait one is suddenly reminded of the then minister Kamal Nath on the TV announcing an ambitious target of 20 KM of roads per day only to find out that we never could touch that target. And what does the data say. Last year, the ministry had managed to award road projects for only 1,933 km – 20% of what was planned for 2012-13.   The road sector saw a dramatic drop last year in the number of projects that were bid for by companies. 13 projects worth about 16,000 crore saw no takers (??##??).

To be fair to Mr. Kamalnath his announcements and later executions might not have resulted in achievements of the target but they did spur construction of roads. In 2011-12  alone 6,644-km was awarded in 2011-12 – the highest since 2004. And we have not seen a more dynamic and focussed minister in the seat after his removal from the position.

The time is running out for the UPA government but the time is changing as well. Inflation has cooled off, Oil, Gold, Silver prices are declining, worldwide demand is reducing, consumer companies are out with heavy discounts. In such an environment this boost to construction of road may the last chance that the Govt. might have to revive sentiments and improve its performance at the next year's general elections. Will the economist Sardar will have the last smile? Only time will tell.