The government’s visible mishandling of spectrum allocation is reflective of a larger problem — the trap that other infrastructure sectors have not yet got released from. And it’s the wrong signals that go out to foreign investors. For infrastructure, a prized market by its sheer size, is likely being held to ransom because of perverse incentives derived from coalition politics.
Simple official statistics are illustrative. The total FDI inflow between 2000 and 2007 in telecom, power and construction (including roads, excluding real estate) was roughly $7 billion. Half of this was in telecom. Now, over 2007-12, we need an estimated $494 billlion, 30% of which is “expected” from private investment. That’s $148 billion. Back-of-the-envelope calculations show that, going by the current pace, FDI would bring only 3% of this. Surely we need to build that pace drastically.
But, given the manoeuvring (coping with corruption in weak governments) required, as is increasingly evident, will FDI inflows accelerate enough? For one, big-ticket companies face increasingly tough compliance norms—such as the US Foreign Corrupt Practices Act.