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The stimulus that won’t work

The stimulus that won’t work
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First Published: Wed, Nov 19 2008. 10 20 PM IST

Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Wed, Nov 19 2008. 10 20 PM IST
Montek Singh Ahluwalia recently said the Planning Commission would shortly announce a public spending plan, especially in the infrastructure sector, to stimulate the Indian economy back into action. Reports indicate that the government may pump in as much as Rs50,000 crore into the scheme.
Illustration: Jayachandran / Mint
Some industry voices have been supportive of the plan and the government itself can be expected to pursue it in the election season with Keynesian alacrity. But two recent reports of mismanaged government projects will temper expectations from the commission’s plans for public largesse.
A week ago, Mint reported that the government had missed several infrastructure targets in sectors such as power, coal, finished steel, railways, roads and petroleum for the period between April and August. Further, a pitiful 234 out of 515 Central projects had been delayed from the date of commissioning. Merely 2% of all projects were ahead of schedule and there had been overall cost overruns of 10.6%.
These were projects not drawn up in a hurry to shore up the economy, but well planned and funded by the government and various ministries and nodal agencies.
Around the same time those statistics were released, and to greater national embarrassment, news emerged that the much-feted 2010 Commonwealth Games to be held in Delhi might be in jeopardy. Austin Sealy, the Commonwealth Games Federation coordination committee chairman, indicated that the slow pace of construction of sports and accommodation facilities might entail relocating or even cancelling the Games.
Both reports echoed similar reasons for project delays: tendering, retendering and land acquisition troubles.
These reports should be sufficient to set alarm bells ringing in Ahluwalia’s ears. Sanctioning crores of public funds with our current mechanisms of government management and oversight won’t boost the economy, besides giving the feel-good notion that “someone is spending somewhere”. Badly managed infrastructure projects—there is little to indicate they will be anything else—will not let those funds achieve their stimulating intent.
Delhi chief minister Sheila Dikshit had, when apprised of the need to complete the Games infrastructure in time, famously compared them to an Indian marriage, where chaos reigns till the end before things fall into place miraculously.
Both the slumping economy and global sporting events, it seems, need to be managed with much more finesse than an Indian marriage.
Will public spending boost the economy? Tell us at views@livemint.com
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First Published: Wed, Nov 19 2008. 10 20 PM IST