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If put into action, NMP will be as big a reform as GST

On August 23, even before the Union finance minister Nirmala Sitharaman launched the Rs 6,00,000 crore National Monetisation Pipeline (NMP) till 2024-25; prominent CPI(M) leader Sitaram Yechury referred to it as “naked loot of national assets”. In the next few hours, Rahul Gandhi joined the fray to oppose the “sale of assets”.

The knee-jerk reaction to the monetisation plan is a reminder of a now obsolete political thought that had held back the country’s infrastructure growth for so long, thereby creating the greatest impediment before growth in income and prosperity.

The truth is, NMP can at best be equated to giving your vacant house on rent and thereby covering the opportunity cost (of blocked finance or paying EMI on it) and generating positive yield. It’s not a sale of assets but leveraging idle assets, that anyone with an iota of knowledge in finance does at the personal level.

It put into action, asset monetisation can be as big a second-generation reform, as GST. Both the ideas incidentally were mooted at least two decades back. One is implemented in 2017. The other one is now taken forward with full vigour.

After 75 years of Independence and 30 years of liberalization, India is poised to leave the need-based economic model behind forever. Merely a four or six-lane highway doesn’t matter anymore. We need to revise all those speed limits drastically upwards. People are ready to pay for speed and more efficient production that fetches higher value.

All developed countries followed this curve. Deng Xiao Ping steered China to this mode in barely two years after Mao’s death, so did Southeast Asia. Travel across Thailand and the infrastructure is distinctly better and so is their export performance.

Recently Vietnam followed the same model to triple export revenue to India’s level in 10 years.  While Bangladesh was banking on cheap labour to dominate the readymade garment exports market; Vietnam surpassed it with costlier labour but more efficient processes. From the second position in the RMG export map, Bangladesh is now relegated to third.

As an early and disciplined mover, China had the advantage of dumping the barbie doll economics for highly automated processes in a rather phased manner. India wasted that opportunity by listening to Mr Yechuris and going back and forth on reforms. China allowed private commercial mining in 1978. We took another 40 years.

Results are visible. Look at our export basket. We are neither here nor there. Three decades after liberalization, India’s export basket is dominated by low-value commodities – iron ore, cotton etc. We are a poor performer on both man-made and cotton fibre-based textiles exports. When it comes to technology products, we are nowhere near China.

The India-China development gap became as wide as 30 to 40 years and we have to invest in infrastructure, processes at an exponential rate to remain in the race. But that needs money. China, South Asia adopted the export economy model and they religiously invested the surplus in infrastructure creation. We neither had a surplus nor were we serious about infra creation.

The Narendra Modi government wants to break this vicious cycle. Not only is it serious about infrastructure but, unlike the previous Manmohan Singh government that was best at the ‘planning and announcement’ department; the Modi government took upon itself the less glorious task of completing the entire backlog of projects and going for more, like the Bullet train. That needs money.

Take northeast India for example. Approximately $12 billion (at current exchange) worth of road infrastructure is under construction. Another $16 billion of road infrastructure is in the pipeline. Add another $ 5 billion estimated cost for connecting all north-eastern capitals by rail. Then huge investments in infra creation in Bangladesh and Myanmar to give the region wider logistics and access choices.

Think of the entire country and the bill is mind-blowing.
Only one Bullet train line will cost nearly $13 billion. The Western and Eastern DFCs (dedicated freight corridor) together (2800 km) will cost an estimated $11 billion. Announced in 2006, the projects achieved little progress till 2014. Now they are nearing completion. And the government wants to extend the DFC network.

Over the last seven years, highway construction peaked across the country. Roughly $10 billion worth of expressways is under construction in Uttar Pradesh alone. Add to that the rush for the creation of urban rapid transport.

Transport is just one segment of infrastructure. From the limited agenda of rural electrification, we are now moving towards 24X7 electricity for all. This needs tremendous investment in the grid and distribution network. 24X7 electricity means huge capacity redundancy.

Renewable capacities increased by more than three times from 29 GW (gigawatt) to 100 GW in seven years. To support this infirm electricity, we need more investment in transmission. Clearly, we are paying more for creating wider choices and that’s needed.

The rapid increase in the use of electricity will not only improve quality of life but will also reduce our dependence on imported oil and gas. Induction heaters became popular. They are replacing the need for imported liquified petroleum gas.

Railways alone consume 40 percent of diesel. Electrification of tracks will replace that demand. Similarly, the popularization of electric vehicles will replace the demand for petrol. They will serve a dual purpose. On the one hand, import bills will be checked. On the other hand, refiners will have more free capacities to tap the export demand.

It’s a complex game. The Digital India initiative unlocked huge opportunities in the e-commerce segment. Small-time meal suppliers in cities now have wider market access. Cash collection increases the chances of theft and pilferage. The supplier can now send food by a delivery boy and collect payment through digital wallets like Google Pay, PhonePe etc. The entire business stands on quality mobile data connectivity.

The big question is who will pay for it? Private investment doesn’t come easy in infra creation due to the long gestation period. Banks don’t lend money for roads and highways either.  Government cannot keep borrowing and endanger the fiscal balance. They need to recycle finance. There are some long-term investors, but they need the right vehicles.

NMP aims to create those vehicles. It is not going to sell highways, simply because there are no takers for that.  No one is ready to block billions of dollars and wait for 25-30 years for returns. Circulation of money is key to business.

The arguments are not difficult to understand, provided of course they are willing to.

(The writer is a veteran journalist and public policy expert. Views expressed are his own.)

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