Will a Keynesian Road Building Programme Put India On the Growth Path?


When in trouble, politicians and countries go back to the British economist John Maynard Keynes. Keynes in his magnum opus The General Theory of Employment, Interest and Money suggested that the way out of a low-growth or recessionary economic environment was for someone to spend more. In such a situation, citizens and businesses were not willing to spend more, given the state of the economy. So, the only way out of this situation was for the government to spend more on public works and other programmes.

The Indian government has decided to do just that. On October 24, 2017, the finance minister Arun Jaitley, announced a Rs 6.92 trillion ($107 billion assuming one dollar equals Rs 64.7) road building programme for 83,677 km of roads, over the next five years.

Out of this, the Bharatmala Pariyojana is to be implemented with Rs 5.35 trillion being spent on it for building 34,800 kilometre of roads. Economist Mihir Swarup Sharma writes in a column on NDTV: “Bharat Mala” is basically a reworked and updated form of the National Highways Development Programme that is almost two decades old.” The programme has been in the works for a while now. In fact, in an answer to a question raised in the Rajya Sabha, the upper house of Indian Parliament, the government had said: “The Public Investment Board has cleared the proposal for BHARATMALA Pariyojana Phase-I in its meeting held on 16 June 2017.”

In fact, there is nothing new about this. The Narendra Modi government, in the past, has shown a tendency to portray old schemes as new ones.

Let’s leave that aside and concentrate on how this programme will be implemented. The government said that substantial delegation of powers has been provided to the National Highways Authority of India and other authorities and government departments.

Over and above the Bharatmala Pariyojana, roads of length 48,877 km will be built under other current with an outlay of Rs .57 lakhs crores.

This road building should help a significant portion of the one million youth entering the Indian workforce every month, find jobs. A large portion of this workforce is unskilled and semi-skilled and road building projects will help cater to this completive advantage of access to cheap labour, that India has. Just the Bharatmala Pariyojana is expected to create 14.2 crores mandays of jobs, according to the government.

The government plans to raise finance for these road projects through a variety of measures. For the Bharatmala Pariyojana, Rs 2.09 trillion will be raised as debt from the financial market. Rs 1.06 trillion will be mobilised as private investments through the public private partnership. The remaining Rs 2.2 trillion will be provided out of accruals to the central road fund, toll collections of National Highways Authority, etc.

For the other road projects Rs 0.97 trillion will come from the central road fund and Rs 0.59 million will come from the annual budget expenditures of the government in the years to come.

Hence, on paper this sounds like a fool proof idea. The government will build roads. It will employ many people in the process and pay them. This income when spent will spur the businesses as well as the economy and India will grow at a fast-economic growth rate. QED.

Only, if things were as simple as that.

The government plans to build a total of 83,677 km of roads over five years. This implies building 16,735.4 km of roads on an average in each of the five years. Is that possible? Let’s look at the record for the last three years.

In 2014-2015, the government built 4,410 km of roads in total. In 2015-2016, this jumped to 6,061 km in total. In 2016-2017 (up to December 2016), the government had built 4,699 km of roads. This data is from the annual report of the ministry of road transport and highways. A report in The Hindustan Times suggests that in 2016-2017, the government built 8,200 km of roads. If the government has to achieve the road building target that it has set for itself over the next five years, it has to more than double the speed at which built roads in the last financial year. And then maintain it for five years. This, seems like a tall order.

Over and above this, acquiring land to build roads will not be an easy task. Nitin Gadkari, the minister of Road Transport and Highways told the Press Trust of India in an interview that even though land acquisition is “tough and complicated“, “it is not a problem for the ministry as farmers and others were making a beeline to offer their land for the highway projects after enhanced compensation.”

But this is not going to anywhere as easy as the minister made it sound. Take the case of the Delhi-Mumbai Industrial Corridor which was announced almost a decade back. While work has started on it, most of the corridor is still plagued by land acquisition issues.

To conclude, building roads to drive economic growth is a very old idea. In fact, it was put in action even before Keynes wrote about it in an indirect sort of way in The General Theory of Employment, Interest and Money.

While Keynes was expounding on his theory, it was al­ready being practiced by Adolf Hitler, who had deployed 100,000 workers for the construction of the Autobahn, a nationally coor­dinated motorway system in Germany which was supposed to have no speed limits.

Hitler first came to power in 1933. By 1936, the German economy was chugging along nicely, having recovered from a devastating slump and unemployment. Italy and Japan had also followed a similar strategy.

How well will things work out in the Indian context? It will all depend on how well the government is able to execute the building of roads. The good bit is that Nitin Gadkari, one of the better performing ministers in the Modi government, is in charge. The bad part is that good execution is not something India is known for.

The column originally appeared on BBC.com on October 28, 2017.

Gadkari cannot say “mere paas saasu ma hai”

Vivek Kaul
So the tables seem to have turned. The story has moved on from Robert Vadra to Nitin Gadkari. Veerapa Moily, the Union Corporate Affairs Minister, had been quick to jump to Vadra’s defence and had said “I have already verified these allegations and no wrongdoings have been found in any of the six Robert Vadra-owned companies.”
Now with allegations against Gadkari coming out thick and fast, Moily has jumped in at the same quick speed and ordered an inquiry against Gadkari. “I have told our ministry to make some discreet inquiry to find out what exactly is the matter… are there any violations of the Companies Act?” said Moily. He also added the ministry would probe it as the matter was in the public domain. “It is all coming in the newspapers,” he said.
What is interesting here is that Vadra’s dealings with DLF are also in the public domain and the news was all coming in the newspapers, as Moily put it in Gadkari’s context. That being the case shouldn’t Moily have ordered a “discreet inquiry” against Vadra as well?
Digivijay Singh, the chief muck raiser and one of the General Secretaries of the Congress party, has written a letter to the Prime Minister Manmohan Singh. “Gadkari has also said he is open to a free and fair investigation. [He] being the national president of the BJP, it is in the fitness of things that his case is properly investigated and he gets a fair opportunity to prove his innocence and clear his name,” wrote Digvijay Singh in his letter to the Prime Minister. “A prime facie case does exist,” added Singh, and requested the Prime Minister to ask the Corporate Affairs Ministry to initiate an inquiry by the Serious Fraud Investigation Office.
There are two things that come out of this statement. In the Congress’ world view of things Robert Vadra remains a private individual. Though he must be the only private individual in the country who is being defended by some of the top Congress leaders (you can read a more detailed argument on this here). But Gadkari is not a private individual and hence he needs to be investigated. The second point is that Digvijay Singh sees a prima facie case existing for an investigation in case of Gadkari. I agree. But it also exists in the case of the Vadra-DLF dealings. I am sure Diggi Raja would have a different view on that.

Before I get into some other points let us try and understand what the Gadkari case is all about. Gadkari calls himself a social entrepreneur. He was the Chairman of Purti Sugar Ltd till about fourteen months ago. “Purti Sugar Ltd. is a sort of cooperative that is owned by the farmers it was meant to benefit. It’s true that the list of shareholders is long, about 10,000 names, that carry the flavour of rural Maharashtra. But farmers (if they are, indeed, farmers) own only 10% of Purti. Mr Gadkari himself owns only 200 shares. The bulk of Purti is owned by just 18 companies. These companies invested about Rs 2-4 crore each, to form the bulk of Purti’s paid up capital of Rs 68 crore. This, essentially, was Purti’s start up money,” Sreenivasan Jain recently wrote in DNA. Purti Sugar is located at Khursapar (Bela) village near about 60 KM from Nagpur.
So far so good. What makes things interesting is the fact that some of the companies that invested in Purti Sugar were not found to be operating at their registered addresses. “When our reporters paid them a visit at their registered addresses, they (surprise, surprise) hit a dead end.Two of the firms — Swiftsol India and Earnwell Traders — are registered at a chawl in the Mumbai suburb of Malad, surprising for companies which have invested about Rs 4 crore in Purti. None of the residents at the given addresses had heard of Swiftsol or Earnwell. The same dead end at the addresses of Chariot Investrade, Regency Equifin, Leverage Fintrade, etc scattered across suburban Mumbai and Kolkata,” wrote Jain.
This is something that a report in The Times of India said as well. “According to records with the Registrar of Companies, five private limited companies with shareholdings in Purti Group—Nivita Trades, Swiftsol (India), Rigma Fintrade, Ashwami Sales and Marketing and Earnwell Trades—are registered in and supposedly operating from a room in Dube Chawl on Andheri-Kurla Road (seen at left). Four other shareholders—Jasika Mercantile, Leverage Fintrade, Regency Equifin and Chariot Investrade—are registered in an under-construction building meant to house slum-dwellers under the SRA scheme.”
What complicates matters further is the fact that Manohar Panse, who used to be Gadkari’s driver, was also a director in many of these companies. A couple of employees of Purti and even Gadkari’s accountant were directors in these firms.
It is well known that businesses tend to operate through a web of companies when they want to hide the real owner’s identity. Also it is easier to channelise ill gotten wealth through a maze of companies. Prima facie that is what seems to be happening in the case of Purti Sugar as well. So the accusation against Nitin Gadkari is pretty strong and hence an investigation is called for.
Robert Vadra was smart on this account. He also operates through several companies (Sky Light Hospitality, Sky Light Reality, Real Earth Estates, North India IT Parks, Blue Breeze Trading etc). But the ownership in each and every case can be easily traced back to him and his mother Maureen.
Getting back to Gadkari, one of the invetors in Purti was Ideal Road Builders(IRB). As Jain writes “Ideal Road Builders purchased shares worth Rs 1.85 crore in Purti in 2001, just over a year after Mr Gadkari demitted office as Maharashtra’s public works department minister. During his tenure, Ideal was awarded a number of contracts by the PWD department, which eventually led to it becoming one of Maharashtra’s leading toll road companies. DP Mhaiskar, founder of Ideal Road Builders, also bought shares worth about Rs 2 crore in Purti. Together, IRB and Mr Mhaiskar control about 8% of Purti Group… In 2010, Purti Group received a secure loan of Rs 165 crore from a company called Global Safety Vision, which has DP Mhaiskar as its director. With this one loan, Purti was able to repay all its outstanding debt.”
So the question being asked here is did Mhaiskar and IRB invest in Purti because Gadkari as the PWD minister awarded contracts to IRB? Gadkari was the PWD minister in the Shiv Sena-BJP government that ruled Maharashtra in the mid and late nineties. Hence, a case for a quid pro quo seems to exist and can be established if a proper investigation is carried out.
In case of Robert Vadra and DLF, things were a little different. DLF gave Vadra an advance of Rs 50 crore against a piece of land of 3.5 acres that Vadra sold to DLF. This advance was paid in installments starting in the year 2008—2009(the period between April 1, 2008 and March 31, 2009). The advance stayed on the books of Vadra for a period of between three to four years. An advance is typically given short term. DLF explained this to be a normal commercial transaction but has been unable to tell us about other cases in which it carried out a similar transaction. The advance was essentially an interest free loan to Vadra. Other than this DLF gave Vadra’s companies other advances as well. It also gave an unsecured loan of Rs 5 crore to Real Earth Estates Private Ltd, a Vadra company.
Vadra used this money to go on a property and flat buying spree in Rajasthan and Haryana. (You can read about it here and here). But what is difficult to establish is how did DLF benefit from all this? Allegations are being made that the Congress government in Haryana went out of its way to favour DLF. Was this because DLF was being nice to Vadra? This business-politics nexus is not easy to establish as it is in the case of Gadkari and IRB.
Other than the government breathing down Gadkari’s neck, the Rashtriya Swayamsevak Sangh (RSS) which installed him as the president of the Bhartiya Janata Party seems to have asked him to come clean on all the allegations by the end of this month. Vadra on the other hand has the full support of his mother-in-law’s party.
At the heart of both the Vadra and Gadkari issues is the nexus between businessmen and politicians. The basic difference is that Vadra is Sonia Gandhi’s son in law and Gadkari is not. To conclude, the smartest thing that Vadra ever did was to marry Priyanka Gandhi. “Mere paas Saasu Ma Hai,” Vadra can say proudly. Gadkari meanwhile needs to consult a good astrologer and figure out when his stars will turn around.
The article originally appeared with a different headline on www.firstpost.com on October 24, 2012. http://www.firstpost.com/politics/why-sonias-son-in-law-is-better-off-than-rsss-favourite-son-501065.html
(Vivek Kaul is a writer. He can be reached at [email protected])

We need to give Kejriwal time: he is testing the waters


Vivek Kaul
We are a funny country. We kept voting the Congress party back to power time and time again for a period of more than 65 years without asking any questions. The party made a mess, turning India into one of the most corrupt countries in the world, where governance has more or less collapsed.
And then comes a man, a former bureaucrat, an IITian, who promises to turn the system around. Arvind Kejriwal is his name. And he is—at least in terms of intentions—our best hope. But, ironically, we want him to be battle ready and give us answers for all that has been wrong with the country right-away.
Here are some doubts that I have seen appearing across the conventional as well as social media:
a) Kejriwal and India Against Corruption(IAC) are too obsessed with politics. It could be a movement if they dug up facts against municipalities, industries and others. (A status of a Facebook friend)
b) They don’t have the organisational strength to propose a viable alternative
c) If Kejriwal is starting a party I’d like to know his economic policy too. Shouldn’t just begin and end in catching thieves? (Another status of a Facebook friend)
d) What is new about all that he has pointed out? It’s just a rehash. (A favourite with newspaper editors. And something which The Economic Times suggests in its lead story today. And even if it is a rehash, does that necessarily make the issues being brought into the public domain by Kejriwal and IAC less important?)
e) What interest groups does the movement represent? What are its priorities, apart from radical transparency and a maximalist Lokpal bill? Where does it stand on religious minorities? What compromises would be unacceptable? (As an editorial in today’s edition ofThe Indian Express asks.)
While these are important questions that Kejriwal and IAC need to answer, but expecting them to answer them immediately and all at once is a tad unfair. If we Indians could give the Congress party 65 years, and still not get many answers from them, we can surely give Kejriwal and his team 65 weeks, if not months, to come up with the answers.
Let me paraphrase lines written by my favourite economist John Kenneth Galbraith (borrowed from his book The Affluent Society) to capture this cynicism against Kejriwal and what he is trying to do. “When Indians see someone agitating for change they enquire almost automatically: ‘What is there (in it) for him?’ They suspect that the moral crusades of reformers, do-gooders, liberal politicians, and public servants, all their noble protestations notwithstanding, are based ultimately on self-interest. ‘What’, they enquire, ‘is their gimmick?’” At the same time we Indians tend to ignore the absolute power enjoyed by the Congress party which has now led to a situation where the Congress leaders are simply not used to answering questions that are asked. As Salman Khurshid, the Union Law Minister, said a couple of days back “Wo (Kejriwal) kahte hain ki hum sawal poochenge tum jawab dena. Hum kehte hain tum jawab suno aur sawal poochna bhool jao.
Getting back to Kejriwal in an earlier piece, I had equated Kejriwal’s decision (then Team Anna) to form a political party to a disruptive innovation. Clayton Christensen, a professor of strategy at Harvard Business School is the man who coined this phrase. He defines it “innovations that transform an existing market or create a new one by introducing simplicity, convenience, accessibility and affordability. It is initially formed in a narrow foothold market that appears unattractive or inconsequential to industry incumbents.”
The point being made here is that a disruptive innovation always starts small and appeals to a small segment of the market. It cannot be everything for everybody from day one simply because the resources are limited.
An excellent example of a disruptive innovation in an Indian context is the Nirma detergent which was created in 1969 by Karsanbhai Patel, a chemist with the Gujarat government’s department of mining and geology. Patel started making the detergent in a room in his house. On his way to office, which was some 15 km away, he sold 15-20 packets every day. Thus, started the great journey which within a decade would give sleepless nights to the top management at Hindustan Lever Ltd (now Hindustan Unilever Ltd).
But the point is that Nirma started small. Patel sold a few packets everyday and his area of operation was limited given the limited resources available to him. The focus was on making a detergent which was much cheaper than the Surf from Hindustan Lever, which dominated the market back then.
Amul, another disruptive innovation, started small in Anand in the Kaira district of Gujarat. But soon it would become very successful and move to other districts in the state as well. In the end it would also be responsible for making India a largely milk sufficient nation that it is today.
Another great example is that of Apple, which brought about a revolution in the personal computer market. Again Apple started small and focused on one section of the market.  As Clayton Christensen told me in an interview I did for DNA, “Apple made a wise decision and first sold the personal computer as a toy for children. Children had been non-consumers of computers and did not care that the product was not as good as the existing mainframe and minicomputers. Over time Apple and the other PC companies improved the PC so it could handle more complicated tasks. And ultimately the PC has transformed the market by allowing many people to benefit from its simplicity, affordability, and convenience relative to the minicomputer.”
Another example is Sony. “In 1955, Sony introduced the first battery-powered, pocket transistor radio. In comparison with the big RCA tabletop radios, the Sony pocket radio was tiny and static laced. But Sony chose to sell its transistor radio to non-consumers – teenagers who could not afford big tabletop radio. It allowed teenagers to listen to music out of earshot of their parents because it was portable. And although the reception and fidelity weren’t great, it was far better than their alternative, which was no radio at all,” write Clayton Christensen, Michael B Horn and Curtis W Johnson in Disrupting Class — How Disruptive Innovation Will Change the Way the World Learns.
So like all other disruptive innovations, Arvind Kejriwal and IAC are small and do not have the necessary organisation to take on heavyweights like the Congress and the Bharatiya Janata Party (BJP). Also, their views on a whole lot of issues that plague India aren’t known.
But what Arvind Kejriwal and IAC have managed to do is focus on one issue – i.e. the nexus between politics and business, and the cosy relationship even between rival political parties. In the case of the Congress party, the nexus between Robert Vadra and DLF has clearly been brought out. And in case of the Bharatiya Janata Party, its businessmen President Nitin Gadkari has been accused of using his political standing to favour his businesses.
This focus has helped Kerjiwal to appeal to the so called “middle-class”. It has also managed to clearly rattle his biggest opponents, the Congress party and now the BJP. The Congress party unleashed a string of lawyer ministers to defend Robert Vadra. The BJP yesterday had both the leaders of opposition in Rajya Sabha and the Lok Sabha (Arun Jaitley and Sushma Swaraj) along with three party spokespersons defending Gadkari in a press conference.
Also right now is the time when Kejriwal and IAC are building their brand. And as marketing guru Al Ries keeps saying, “Focus is the essence of marketing and branding”. They are doing just that. There is no point in spreading their thin resources all over the place. Once the brand is built they can gradually start moving to other issues.
By then, hopefully, more people would have joined them also. Any disruption does not come as an immediate shift. Similarly, the IAC isn’t going to take India by storm overnight. It will need time. In a way Kejriwal and IAC are in a similar position like the Congress party was in 1885 when it was formed. The initial aim of the party was to get a greater share in the government for educated Indians. The party wasn’t opposed to British rule at that point of time. The point being the Congress party wasn’t clear from day one all that it would do in the years to come. As years went by, things evolved and the party led India to its independence and tried to come up with answers to questions that arose along the way.
The challenge for IAC will be to figure out how to hold the interest of the people once they start losing interest in the corruption issue. Also they might appeal only to a section of the voters initially, probably the urban middle class, like Apple PCs had appealed to children and Sony radios to teenagers. So they are likely to start off with a limited appeal. Chances are if they stay true to their cause their popularity might gradually go up over the years, as has been the case with disruptive innovators in business.
Any disruption does not come as an immediate shift. As the authors write, “Disruption rarely arrives as an abrupt shift in reality; for a decade, the personal computer did not affect DEC’s (Digital Equipment Corp’s) growth or profits.” Similarly, Kejriwal and IAC aren’t going to take India by storm overnight.  They will need time. And as time goes by more questions will be asked of them and they will need to come up with answers.
As I had said on an earlier occasion, there are three things that can happen with this disruptive innovation. Kerjiwal’s party tries for a few years and doesn’t go anywhere. That doesn’t harm us in anyway. Kejriwal’s political party fights elections and is able to build a major presence in the country and stays true to its cause. That benefits all of us. Kejriwal’s political party fights elections and its candidates win. But these candidates and the party turn out to be as corrupt as the other political parties that are already there. While this will be disappointing, but then one more corrupt political party is not going to make things more difficult for the citizens of this country in anyway. We are used to it by now.
As far as Arvind Kejriwal and IAC go, they must well remember these famous lines from Majrooh Sultanpuri, the famous Hindi film lyricist and Urdu poet.
Main akela hi chala tha janibe manzil magar,
Log saath aate gaye aur karawan banta gaya.
(Loosely translated, it means this: I had started off alone towards my goal, people began joining and a huge caravan began forming!)
The article originally appeared on www.firstpost.com on October 18,2012. http://www.firstpost.com/politics/we-need-to-give-kejriwal-time-he-is-testing-the-waters-494970.html
Vivek Kaul is a writer. He can be reached at [email protected]