Can Highways And Airports Drive India's Growth Story?

It is widely acknowledged that India's infrastructure sector is in a mess. However, the central government has been investing greatly in urban infrastructure in the past two years. Union Finance Minister Arun Jaitley thinks that India's infrastructure growth story will be driven by highways and airports because private-public partnership has worked quite well in the infrastructure sector.

Jaitley pointed out that India's airports have become more convenience-centric. This argument is a highly underrated. Airports and railways stations become more convenience-centric when the society becomes affluent, and when people are comfortable enough to value convenience.

There is, of course, a problem with the argument that airports being convenient-centric has more to do with economic progress. Airports are usually funded by the government, and even when there is greater private participation, the extent of government funding and interference remains high. So, even when airports become more convenience-centric, this does not necessarily mean that people have started valuing convenience. It is quite possible that we are spending more on airports, like how ancient emperors spent on monuments. But even then, it is quite probable that governments spend more on airports and railways stations when income levels rise, and when tax contributions rise.

Convenience-oriented airports receive much flak, because it is seen as a luxury. But, airports have a much greater impact on the economy and housing prices than it is recognized. As the wealthy tend to value convenience, foreign investment declines when airports do not grant user experience. Moreover, frequent travelers prefer to live not too far away from airports. So, housing prices rise near airports, and economic activity rises in such areas.

But in the past few years, debt in private infrastructure companies has been rising. Because of the uncertainty in the policy environment, the position of many of these companies is precarious. Unless the government creates a favourable regulatory framework, things are not likely to significantly improve in the near future.

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