Bloomberg recently reported that the Indian Prime Minister has announced the country's infrastructure investment project for Mumbai, with a total value of over 294 billion rupees (approximately 3.5 billion US dollars). The project aims to alleviate traffic congestion and promote employment, including the construction of highways, railways, tunnels, and freight yards.
The Economic Times of India reported on the 13th that the Modi government's investment plan for Mumbai this round focuses on key infrastructure projects such as roads, railways, and ports, aiming to elevate Maharashtra to a global financial powerhouse and maintain Mumbai's "leading position" in the fintech sector.
Mumbai is the center of the Indian economy, but its infrastructure has always been outdated and traffic congestion is unbearable. More than 60% of people live in low rise slums, adjacent to high-rise buildings, reflecting the prosperity and backwardness of Mumbai. In terms of transportation, although there is a central railway station building left by British colonizers in the center of Mumbai, there are also slow-moving suburban trains.
In the past decade, the Modi government has invested heavily in infrastructure construction. The infrastructure situation in Mumbai has also improved. Since the beginning of this year, Mumbai has made great strides by launching multiple projects to bridge the gap, including the opening of India's longest bridge, the Mumbai Cross Sea Bridge, the construction of coastal roads in the south of the city, and the opening of the northern section of the subway line. According to Bloomberg, in the next two years, new infrastructure projects worth 44.4 trillion rupees will be put into use in Mumbai, "equivalent to the total value of infrastructure projects built in the past 11 years".
The infrastructure investment targeting Mumbai is only a part of the Modi government's ambitious' Big Infrastructure Plan '. In the past decade, the Modi government has carried out large-scale infrastructure upgrades throughout India, including roads, railways, and airports, while investing heavily in digital infrastructure. According to Bloomberg's report in May this year, Modi had further promised during the election period to launch a massive infrastructure plan in the next two years.
The massive infrastructure investment is also seen as the core sector of 'Modi Economics 3.0'. In addition to infrastructure construction, 'Modi Economics 3.0' also includes the development of digital networks and the utilization of clean energy.
Qian Feng, Director of the Research Department of the National Institute for Strategic Studies at Tsinghua University, told Global Times reporters on the 15th that India's infrastructure development started from a very low point. In the past few decades, due to insufficient investment, India has been severely troubled by old railways, poor quality roads and ports, and unstable power supply. In addition, as a federal state, India's relatively decentralized political system also makes it more difficult to coordinate transportation connections between states. Often, if one party has different opinions, infrastructure projects may be temporarily suspended at the border between states, forming a "dead end road", and resolving differences may take several years.
As a guest observer, some infrastructure in India has been improved, but due to a weak foundation, too many historical debts, and poor project management, India's overall infrastructure is still relatively backward, which remains an important constraining factor for economic development, "Qian Feng told reporters.
In February of this year, a survey by The Hindustan Times showed that nearly half of the 1788 large-scale infrastructure projects supervised by the federal government were behind schedule, with cost overruns of about 17%. The logistics cost in India accounts for 18% to 20% of the total production cost, while in China it is only 8% to 10%.
Indian media reported that it is not easy for Modi to achieve his infrastructure plan, as he faces multiple challenges such as high logistics costs, urban traffic congestion, and environmental issues. There are also comments that although the Modi government's newly built highways and high-speed rail projects have won praise from the business community, there are also opponents who say these are "flashy projects that are not conducive to the poor".
The Indian government also has hidden dangers in fundraising. Last December, the International Monetary Fund (IMF) warned that India's public debt could lead to "huge financing needs". Qian Feng believes that after Modi starts his third term, he will undoubtedly continue the current infrastructure investment policy, but the biggest problem at hand is how to solve the funding source. Currently, India's public debt to GDP ratio is about 85%, and the IMF predicts that this ratio may exceed 100%, posing a huge fiscal challenge.
Qian Feng believes that since taking office, Modi has clearly favored business oligarchs such as Adani and Abani in infrastructure projects, and has even been criticized and accused of "collusion between government and business". But infrastructure projects often take a long time to start generating revenue. If the current returns and rates of return are low, it will be difficult to attract large-scale international investment. If we follow the previous development model and allocate infrastructure projects such as roads, ports, airports, energy, and communication to a few selected industrial enterprises by the government, and continue to implement the 'national leading enterprise' model, which involves the government selecting several large private groups to complete, it may bring financial and economic risks, and even trigger political risks, "said Qian Feng.
