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Business News/ Economy / India Spends Big on What It Needs Most to Catch Up to China

India Spends Big on What It Needs Most to Catch Up to China


The country is building fast in an effort to address gaps in its infrastructure that have long held back its economy.

India had about 90,000 miles of national highways at the close of the fiscal year in March, almost double the more than 49,000 miles it had a decade earlier. Premium
India had about 90,000 miles of national highways at the close of the fiscal year in March, almost double the more than 49,000 miles it had a decade earlier.

MUMBAI—The financial capital of India has become a colossal construction site. The barriers that try to keep daily life on track in the metropolis on the country’s west coast proclaim: “Mumbai is upgrading."

A new road being built along the Arabian Sea is aimed at easing congestion in a city where three-lane roads are frequently occupied by five lanes of honking traffic. A rapid-transit metro system is being extended to ease pressure on suburban trains overflowing with people. A rail freight corridor stretching all the way to New Delhi is expected to cut the time it takes to ship goods along the 870 miles to 14 hours—from 14 days.

The construction in Mumbai reflects a national push in India to transform a country where economic growth has long been snarled by crumbling and inefficient infrastructure. In recent years, the government has poured money onto the problem, an effort that has only accelerated as Western governments and multinationals have grown uneasy over relying on China for manufactured goods.

Some signs suggest the changes are bearing fruit. The enormous outlays are helping to power India’s economy, with the International Monetary Fund saying capital spending and productivity growth will be the biggest drivers of India’s expansion in the years ahead. Foreign investment, from companies including Apple and Taiwanese electronics giant Foxconn, has more than doubled in the past 10 years, to around $50 billion in 2022.

Economists say India remains a long way from having the kind of infrastructure it needs to foster a higher-income economy. A deadly train crash in June highlighted the need for further improvements in railway maintenance and safety. The country especially lags behind China, which has spent decades investing enormous sums in infrastructure that undergirds its status as the world’s factory floor.

“Is India’s infrastructure tangibly better? The answer is yes. Is it good enough for the kind of aspirations India has? Then the answer is no. It is still a work in progress," said Arup Raha, head of Asia economics at Oxford Economics.

India has budgeted more than 10 trillion rupees, or about $120 billion, for capital expenditure in the fiscal year ended March 2024, according to India’s finance ministry. That is 37% higher than the previous fiscal year, and more than twice the amount spent in 2019.

In all, India’s government has published a pipeline of infrastructure projects covering the years 2019 through 2025 totaling just shy of $2 trillion. Most of the funding is expected to come from central and state governments, though the government is hoping the private sector will finance about 22% of that sum, according to Invest India, the country’s investment promotion agency. Sectors include roads, railways, urban development and housing, energy and irrigation.

The scale of construction in recent years has been staggering. India had about 90,000 miles of national highways at the close of the fiscal year in March, according to the Ministry of Road Transport and Highways, almost double the more than 49,000 miles it had a decade earlier. Hundreds of miles of new roads are being added every month.

India now has more miles of electrified railway than the U.K. or France, according to the Organization for Economic Cooperation and Development. Ambitious megaprojects in the works include a string of new or refurbished ports garlanding India’s coastline. Bridges and tunnels are connecting remote provinces and solar-energy parks are sprouting to power homes and factories. Mass transit systems are popping up in dozens of cities. New railway lines are linking major cities with high-speed trains.

“We are extremely sensitive to how well supply chains work," said Zarir N. Langrana, executive director of Tata Chemicals, a global chemicals business and unit of India’s giant Tata Group conglomerate.

The improvements in infrastructure aren’t confined to smoother roads, Langrana said. They also include better facilities for storage as well as digital infrastructure that allows trucks to speed through checkpoints at state lines, where previously they would have faced paperwork checks and cargo inspections.

Though he said India’s smaller ports need improvement, the overall result is an economy better equipped to handle growing volumes of international trade.

“I don’t think the infrastructure of seven or five or three years ago could have handled it," Langrana said.

Wes Burgess, chief product officer of Cocona, a U.S. firm that makes temperature-regulating materials used in apparel and bedding, first visited India in 2020 to scope out investment opportunities as part of the Boulder, Colo., company’s effort to diversify its supply chain away from China.

The company found manufacturing partners throughout India and big customers in Delhi and Bengaluru, and sees big opportunities in India’s huge consumer market to sell its products as well as reduce its exposure to China.

He has been back a few times since that first visit and said that each time he is struck by how much construction activity is happening. “Everywhere there is new infrastructure being built," he said. An express train he’s taken from Mumbai to Ahmedabad “just flies," he said, and he said India now has some of the best airports he’s visited worldwide.

Still, India is climbing out of a giant pothole. The geyser of spending follows decades of underinvestment. Ancient railways, shoddy roads and spotty electricity meant India was for years left on the sidelines of global supply chains that require hyper-efficient logistics networks to assemble products and ship them to far-flung markets.

Average monthly electricity generation in the 12 months through August was up 42% compared with a decade earlier, according to official statistics, but at times demand can still outstrip supply. A dry August, for instance, meant India burned more coal than forecast as the grid strained to meet a surge in demand to power irrigation systems.

The upswing in construction is also the result of a sea change in how projects are developed, financed and delivered, say economists, infrastructure specialists and corporate executives.

A decade ago, India’s sprawling conglomerates initiated many big road and power projects themselves, fueled by cheap loans from state-owned banks. Often projects would never get finished, ensnared in legal battles over acquiring land from farmers and political wrangling between states and central government. The system was plagued by graft. Some developers ran out of money. Souring loans piled up at India’s banks.

“It was all pretty patchy," said Saugata Bhattacharya, chief economist at India’s Axis Bank.

These days, the central government in New Delhi and state and municipal administrations are more in tune about the need to remake India’s infrastructure, say economists and infrastructure specialists. Road, rail and power developments are mostly financed or underwritten by the central government, part of a master plan of almost 10,000 projects slated to nudge India’s economy closer to the $5 trillion mark by 2025.

Construction usually doesn’t start until most of the necessary land has been acquired. Infrastructure firms handle the design, engineering and construction, and in the case of a major road, for instance, receive a concession to operate a toll and collect the revenue. More often than not they sell those rights upon completion to domestic or, increasingly, international investors seeking steady returns, allowing them to collect a profit, pay off their loans and recycle the capital into new projects.

Mumbai’s stop-start efforts to refashion its crumbling facade encapsulate the shift.

The city, home to 21 million people where skyscrapers tower over slums, is built on top of seven islands. Much of its infrastructure dates from colonial times, when British rulers laid roads and railways running north to south to reach the harbor but next to nothing connecting the city’s east and west—a legacy that makes navigating the city difficult even today.

Projects stalled during a period when the state government was hostile to the ruling Bharatiya Janata Party of Prime Minister Narendra Modi. The freight corridor was first proposed a decade ago and construction has been beset by delays. The final section completing the route between Delhi and the port at Mumbai is scheduled to open in March.

The first stretch of the new road hugging the coastline is due to open early next year. Planners hope it will dramatically ease congestion and speed journey times from the suburbs to the commercial district. A new metro line is slated to open in December.

In terms of the quality of its infrastructure, “Mumbai will soon be able to match foreign cities," said Deepak Thackley, 30, who runs a shop selling sweet delicacies beside a famous temple on one of the city’s crowded thoroughfares.

Already, his business is benefiting from improvements to the fabric of the city, Thackley said. Bordering his shop is a new lane with better drainage that prevents flooding during the monsoon, making it easier for devotees to visit the temple. A two-hour commute by rail from home has been cut in half by the nearby metro station, one of a handful already up and running.

“Now I can reach home early after work and spend more time with my family. It’s a nice feeling," Thackley said.

Write to Jason Douglas at and Vibhuti Agarwal at

India Spends Big on What It Needs Most to Catch Up to China
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India Spends Big on What It Needs Most to Catch Up to China
India Spends Big on What It Needs Most to Catch Up to China
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India Spends Big on What It Needs Most to Catch Up to China
India Spends Big on What It Needs Most to Catch Up to China
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India Spends Big on What It Needs Most to Catch Up to China
India Spends Big on What It Needs Most to Catch Up to China
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India Spends Big on What It Needs Most to Catch Up to China

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