India will have to invest significant share of its GDP to improve rural roads access: IMF

Business Saturday 07/January/2023 12:11 PM
India will have to invest significant share of its GDP to improve rural roads access: IMF

New Delhi: The International Monetary Fund (IMF) has said India will have to invest a significant share of its GDP to improve rural roads access.
The IMF in a book -- South Asia's Path to Resilient Growth -- said gradually raising rural access to 90 per cent by 2030 would require about 2.4 million additional km of all-weather roads which is an increase of 39 per cent in road length. While construction costs vary by road characteristics, namely the number of lanes and type of surface and region, which means for example a third-tier all-weather road in the north may cost twice as much to build than in the south, the IMF estimated average cost per kilometre of about $509,000.

Thus, extending the road network by 2.4 million km would require an aggregate investment of $1.2 trillion by 2030, which on an annualised basis is equivalent to 2.7 per cent of gross domestic product (GDP) in 2030, including depreciation, according to the UN financial agency.

Land and financing reforms, and strengthening subnational institutions were also essential to expedite road infrastructure development. Many infrastructure projects have stalled because of difficulties in land acquisition or the slow pace in obtaining government clearances, IMF added.

The financial agency said addressing these weaknesses could include initiatives such as enhancing procurement practices, which means increasing openness and transparency and limiting red tape, and improving risk allocation which means shifting some of the risks related to land acquisition to the government while maintaining the construction and commercial risks in the private sector.

While central road agencies were well-equipped and staffed, many state and local level administrations needed to increase institutional and technical capacity to accelerate road network development, IMF said.

Subnational institutional and technical capacity requires buildup to cope with road network expansion, as about 90 per cent of the road budget is administered at the subnational level, according to IMF.

The IMF said the private sector has emerged as a key player in the development of road infrastructure.
"Many private players are entering the business through the public-private partnership model. In addition, the National Infrastructure and Investment Fund was formed to facilitate international and domestic funding in infrastructure and attract equity capital from both international and domestic sources for infrastructure investments in commercially viable projects," the UN financial agency added.