If the slogan “Make-it-Happen-in-India” is the prelude to the vision of “Make-in-India”, the economic transformation must start with improvements to the infrastructure.

While many Indian politicians and officials, led by Prime Minister Narendra Modi, have been enthusiastically trumpeting the “Make-in-India” slogan, trying to entice foreign manufacturers and investors to use India as a manufacturing site, the “Make-in-India” slogan would have a hollow ring if the country does not back all its well-meaning intentions with good and viable infrastructure.

India’s attractive features, including a huge market of middle-class consumers and abundance of highly qualified experts and skilled workers, will come to naught in the face of inadequate infrastructure.

The “Make-in-India” slogan’s success is dependent, almost entirely, on a viable and effective infrastructure; indeed, the “Make-it-Happen-in-India” slogan seems to be its precursor.

(L to R) Indian finance minister Arun Jaitley, former Australian Prime Minister Kevin Rudd at the Asia Society.
(L to R) Indian finance minister Arun Jaitley, former Australian Prime Minister Kevin Rudd at the Asia Society.

Infrastructure Issue

Ministers and high-ranking officials emphasize that infrastructure development is a top priority when they make a pitch to potential foreign investors for India as a manufacturing center.

Infrastructure development was also a key element when Indian finance minister Arun Jaitley recently participated in a panel discussion at the Asia Society in New York, led by former Australian Prime Minister Kevin Rudd, who currently works as the president of the Asia Society Policy Institute.

Jaitley observed that under Prime Minister Modi’s 2014 initiative Make in India, New Delhi embarked on an ambitious program to create jobs for millions of its citizens, who together comprise the world’s second-largest population. “Infrastructure development is central to this plan,” Jaitley said, adding that India was investing heavily in building regional airports throughout the country and 233 highways were now being constructed.

Jaitley emphasized the crucial importance of manufacturing for uplifting India’s economy and creating jobs. “Manufacturing is where the large number of jobs are … India has opened up sectors such as defense, railways, medical appliances, infrastructure, etc. to attract investments. Our infrastructure needs are huge … 233 national highways are under construction today. Our target is to build 30 kms of road a day … we are presently at 21 kms a day. We are building and modernizing existing seaports and will allow the private sector to run corporatized seaports. Our airports in Mumbai, Delhi, Bangalore, Hyderabad, etc. are much better than in some developed economies. We will focus on regional airports,” the Indian finance minister said.

Rudd, who described Jaitley’s remarks as “cogent and articulate”, revealed that the Asia Society Policy Institute was also pushing for India’s membership in the Asia Pacific Economic Cooperation (APEC) and through it for membership in the Trans-Pacific Partnership (TPP); the U.S. Congress TPP agreement still needs to be ratified by the U.S. Congress to become effective.

Jaitley’s cabinet colleague, Ashok Gajapathi Raju, the Minister for Civil Aviation, has also emphasized the significance of infrastructure. He recently emphasized at an air-cargo seminar in India the role infrastructure plays in the development of air-cargo hubs, much to the delight of the air-cargo stakeholders. The economic reforms in India, accompanied by improvement in transportation facilities and industrial growth, have increased the opportunities for logistics service providers in India. The e-commerce boom in the country, for example, has ushered in an entirely new brand of logistics solutions.

Indian Logistics

Frost & Sullivan’s recent study, ‘Indian Logistics Industry 2016 Outlook,’ has projected that India’s logistics industry is likely to post an annual average growth rate of 8.6% between 2015 and 2020. Under its Foreign Trade Policy (2015-2020), India aims to increase the value of trade to US $900 billion by 2020. Exports will go up when manufacturers and others move ahead in step with government initiatives like ‘Make in India,’ ‘Digital India,’ and ‘Skills India’.

The study mentions that while sea freight—more than 70% of India’s international trade is through its sea ports — could grow by 5.7% driven by demand from Asia, Europe and Africa, international air freight is likely to grow at 12.5% against domestic air cargo— that comprises one-third of total air-cargo volume— which could grow by 2.3% in 2016. Under India’s 12th Five Year Plan (2012-17), an estimated US $11.4 billion has been allocated for airport modernization and expansion, with 13 regional airports having been identified for infrastructure expansion.

However, this official allocation for airport infrastructure development is a fraction of the huge potential inherent in India’s overall infrastructure development. India’s infrastructure sector has an estimated investment potential of $ 1 trillion until 2017, and another $ 650 billion for the urban infrastructure over the next 20 years.

At the Asia Society session, Jaitley acknowledged that India had to move forward for development in two areas - infrastructure and rural development. These areas, he added, would be the “focus area” while moving in the future direction of the economy.

Apparently, trying to assuage the fears of some foreign investors, who often complain about the non-transparent and anachronistic laws and regulations that impede their operations in India, Jaitley said that several laws have to be changed to ease processes, making the business environment easier, and bringing greater transparency into the system.

India’s infrastructure deficit has figured prominently at several logistics events. It was a major focus at the Air Cargo India 2016 event recently held in Mumbai where a number of foreign experts voiced their concern over the inadequate and antiquated infrastructure in India and maintained that the country can fully realize its “Make-in-India” vision only if the infrastructure deficit was first tackled.

D. Murali, executive director (cargo) at Air India, spoke of the urgent need to improve facilities at airports other than the six international airports of Bangalore, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. “The other airports, where we have a lot of potential, don’t even have warehouses,” Murali said, adding that there were, in some cases, no X-ray machines for cargo security screening. These deficits precluded the smooth movement of cargo from the smaller to the major international airports.

Alexis von Hoensbroech, executive board member of Lufthansa Cargo, one of the panelists at the Mumbai event, told the American Journal of Transportation that given India’s size and her “very entrepreneurial people”, the country offered far more potential than thought of now. To tap this huge potential, von Hoensbroech suggested that three elements had to be urgently addressed – infrastructure, bureaucracy and digitalization. “With Make-in-India, we seem to be addressing those issues, and I believe that’s really what needs to be done.”

The infrastructure also created huge congestion of consignments that pile up, for example, at Mumbai airport in the afternoon when all the air-cargo arrives. Inadequate infrastructure is the cause of this gridlock in cargo traffic. The slow bureaucratic procedures, entailing a plethora of forms that defeat the purpose of urgently-needed air shipments, ought to be simplified with the use of technology, von Hoensbroech said. Digitalization would be the mantra to achieve faster clearances of air-cargo shipments, particularly those containing pharmaceuticals, perishables, etc. that had to be quickly cleared.

Juggling with figures, Renu Singh Parmar, a senior advisor at the Indian Ministry of Civil Aviation, said at the opening of the Mumbai conference that according to her ministry’s data, India handled some 2.58 million tons in the 2014-2015 fiscal. This figure is projected to rise to 4.2 million tonnes in the coming five years, and further to 6.08 million tonnes in the coming ten years. By 2031, the figure would reach 8.75 million tonnes. “We estimate that for the rest of 2015-2016 the total Indian cargo volume will grow by 6.7%,” Parmar said.

Indeed, many international logistics players, sensing tremendous business opportunities in India’s pharmaceuticals sector – Indian sources claim that the country is the world’s biggest supplier of generic medicines and the United States is its largest market - a special pharma forum at the Mumbai event afforded the pharma-dedicated shippers the opportunity to voice their concerns and provide updated feedback on the pharma cargo shipments. India exports pharma products to roughly 180 countries, posting a 10.3% growth rate to $15.5 billion in 2014-15, up from $ 10.4 billion in 2010-11.

In an interview at the recent Interphex 2016 pharma technology show in New York, Manish Singhal, assistant secretary general of the Federation of Indian Chambers of Commerce and Industry, highlighted India’s growing importance as a major global player in the pharma industry. “After the U.S., India has the world’s second largest pharmaceutical approvals from the U.S. Food and Drug Administration,” Singhal said, adding that India’s global pharma exports were expected to grow to $40 billion in 2020.

Nevertheless, many pharmaceutical buyers in the West fear that inappropriate handling of pharma shipments, requiring special cooling temperature-controlled containers, can also damage the contents of the consignments, as it can happen, particularly, in transit from the original point of shipment to the plane. Before the shipments are loaded onto the plane, the consignments are many times left on the airport tarmac and exposed to the heat, thus damaging the contents, particularly if the products are temperature-sensitive products such as vaccines. Indian airport representatives at the Mumbai event reacted by saying that they were taking steps to address this problem, with Manoj Singh, the head of cargo at Mumbai International Airport, declaring that the problem will be addressed in “a couple of months from now”.