**[investwise]** Building India's Urban Infrastructure

 

India's urban infrastructure has long been in decay. The government's new plan to build a series of "eco-towns" with Japanese assistance belatedly acknowledges the importance of the urban environment, and also signals the deepening involvement of Japanese companies in India's infrastructure development.   The government has signed contracts with a group of Japanese companies for pilot projects leading to the development of new eco-friendly towns. The group includes Hitachi, Mitsubishi, Toshiba, Tokyo Electric Power and JGC. The pilot schemes initially follow the route of the new Dedicated Freight Corridor (DFC) between Mumbai and Delhi.   The towns will be modeled on Japan's own Kitakyushu Eco-Town, designed with integrated transport systems and for low energy-usage, minimizing pollution and maximizing recycling. Each pilot scheme is to cost an estimated $10 billion.   Urban Neglect The initiative follows decades of neglect, during which ruling ideologies turned away from urban growth to favor the rural economy and keeping the peasantry on the land. Urban expansion has been largely unplanned and thus unable to draw on public resources for infrastructure.   --Institutions. Until 1992 India did not even have a Ministry of Urban Development. One-third of the current urban population is estimated to live in shanties and huts. The present five-year plan (2007-2012) calculates that India's cities are short of 23 million residential units, especially for low-income families.   --Infrastructure. Water and sewage services are inadequate. Several "colonies" that grew up around the edges of Delhi have been abandoned for lack of water connections, and much of Bangalore is subject to water rationing during the dry season.   --Transport. While integrated metro systems have been under consideration for many years, they have been slow to develop. Only Delhi can boast an extensive metro-rail network.   --Illegality. A series of interventions by the Supreme Court has revealed the extent of unplanned urban sprawl. In Delhi it has closed down 150,000 illegal industrial enterprises, cleared the streets of tens of thousands of illegal encroachments, torn down houses and ordered the termination of illegal water connections to "colonies."   Vision of the Future The issue of urban planning has now come to the fore, not least through the Supreme Court's caustic rulings. As well as showing increased political will to address the problem, the eco-towns initiative represents a significant change in attitudes toward urban India. Moreover, it is significant that the pilot schemes should be situated along the DFC and involve Japanese finance and engineering.   --Corridor scheme. The DFC has been widely seen as a vanguard enterprise carrying India toward a new stage of industrial development. Its intention is not merely to move goods faster between the country's two largest metropolitan areas, but also, along the way, to promote a string of new industries and towns, taking advantage of the improved transport system. Eventually the DFC would mark an 800-kilometer belt of manufacturing and commercial enterprise.   --Japan partnership. Japanese companies have come to play key roles in several of India's most advanced development schemes. Their financial support and engineering skills helped to pioneer the Delhi Metro. They have also been involved from the first in the railway projects lying at the core of the DFC. The ability of Japanese companies to tap outside finance and provide cutting-edge engineering skills puts them at an advantage in the scramble to gain a share of the contracts associated with India's infrastructure needs. If all the Indian government's current plans are fulfilled, these could be worth more than $1 trillion by 2020.   Backlash? There are political forces in the wings questioning the desirability of Indian society's move toward urban and industrial modernity. To some extent these forces emanate from the peasantry, whose ties with the land are under threat. However, even more, they appear to come from sections of India's opinion-making (and politically influential) middle class, who preserve a romantic attachment to the countryside. Protest movements to challenge the conversion of farmland to industrial and infrastructure uses have been growing. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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