Mouldy Growth Fundamentals



Growth “wallahs” (RBI, MOF) routinely underestimate the interlinked role of land, water and housing in development. In India’s context, these are critical for a long term growth strategy. Our growth czars are disingenuous in routinely deriding the use of equity markets and foreign investment as valid indicators for economic health but are quick to play to only these two indicators for trumpeting economic health.

Sadly, our development vision remains limited to what foreign entities can do. This was illustrated by the recent Indian call for the World Bank to ensure development finance for Infrastructure.  Contrast this with China, which confidently mooted the idea of an Asian Investment Bank at the recent APEC jamboree. Full marks to the Indian contingent for realism but are we really that helpless.

The view from North Block invariably focuses on the availability of finance as the key constraint. This sounds odd for a country growing at 5%, or thereabouts. Surely international investors should be interested, if we have a saleable project profile, to invest an additional US$75 billion a year taking us from under 2% to a total share of 7% in world FDI (close to our share in world GDP growth over the last decade) and from an investment ratio of 35% to closer to 40% (China 48%).

Forget foreign investors. Why is it that large self-help groups, like Sahara, who reportedly raised INR 240 billion from 30 million investors don’t do something productive with the money in India. The asset value of the top 20 Indian realty companies is INR 700 billion.  Indian banks have made available an additional INR 1500 billion to pump up the land and realty market. 11 million apartments are lying empty and unused<>. Why perpetuating this bubble by allowing foreign investment in realty?

Here is where the importance of land, water and housing for the urban poor kick in. All three are scarce resources and hence the source of huge rents for the policracy. Take housing. If you are a migrant into Delhi the cheapest urban land available illegally in a slum would be @ INR 20,000 per square foot. Four months income just to be able to stand up. Is it any wonder that the paved sidewalks of Delhi are a better alternative despite the constant noise, pollution and danger from tipsy BMW drivers? Rent in urban slums is INR 15 per square foot per month. A substantial portion accrues either as a lump sum or as an annuity to those who are supposed to implement the rule of law. Is there any wonder them that nothing substantive is done to (a) control in-migration or (b) provide suitable transit or temporary housing at regulated rates for recent migrants and (c) suitable relocation into permanent homes. If incentives (tax rebates and cheap credit) are needed for realty, shouldn’t they be for social entrepreneurs who provide these facilities?

Slums cluster large masses of humanity together (1 person per 2 square feet) without regard for sanitation. Club this with the understandable preference of the recent migrant for open defecation rather than face the filth of public latrines and we have the mix for a health disaster. Rusted water pipes, passing through filth, with only intermittent water pressure to keep the filth out, shallow wells and the cohabitation of animals are the originators of the infamous “delly-belly”. If you set up an International Hotel or Health Facility, the lowly cleaners will all come from a slum. Unless management is very careful and delouses them daily, they will carry the bugs from their homes under their finger nails, in their shoes and into the shiny, sterilized exterior of their workplace. Welcome to an integrated and seamless world.

India has a per capita annual availability of around 1500 cubic meters of water. We use only around 500 cubic meters so we are a long way from being water stressed. The problem is in the poor manner in which we degrade and waste water and the skewed availability across regions. We do not for instance harness Arunachal Pradesh’s hydro power potential of 40,000 MW and let the water go waste. We fail to treat industrial effluents and sewage before discharging them raw into rivers. The Hindus amongst us, are not even able to encourage the use of crematoria and discourage the practice of burning our dead (around 85 million every year) on the banks of rivers and if the wood runs short just pushing the remains under water.

We have even forgotten the Garland Canal project of Rao and Dastur, proposed in 1972, when public investment was not a red rag. The idea then was to divert the surplus water in the East to the deficient areas in the South and the West. It was ambitious and well beyond the financial capacity of the foreign multilateral and bilateral funders, we are so reliant on, so we buried it. We should take a leaf from China which is pursuing exactly a similar project to transfer water from its surplus South to the North and ignore the “noise” from fundamentalist, do-gooders and narrow interests. Of course water harvesting and pricing water correctly is a must but supply constraints cannot be ignored either.

Land, its ownership and easy, contractual availability is crucial for business. It is never clear why governments, who court new investors, do not first utilize land owned by the government for the purpose, before resorting to acquiring privately owned land. After all, State action (even under the new Land Acquisition Act) is deemed to be in public interest and needs no justification. Once the governments land cache is exhausted, it can always renew it. Has anyone ever done an audit of land owned by government agencies against their foreseeable needs? I can find nothing on the website of the Comptroller and Auditor General of India (CAG), though one is hampered by the absence of a “search” function, on this otherwise informative website. The government’s functionality is frozen by its inability to take decisions within the existing regulations. Its latest strategy is to attack the messenger (the CAG) in a desperate last minute attempt to…..what else?…kick the ball elsewhere.

The PM shall shortly be on his way to China. One hopes that after the handshakes are done; the photo op. captured and the Mai Tais downed, his team would take the opportunity to talk with the people who are building the North-South Link Canal; check how Beijing manages its migrants; view their waterways and reflect on China’s land use strategy. This may be more useful that signing a no-trespass protocol. Instead, invite China to develop Arunachal’s Hydro Power; invite the Chinese to visit Varanasi and suggest what can be done to respect the Ganga, whose magic has not waned, despite the filth we are dumping in it. The dragon waiting to devour us is not in China, it lives in the “gallis” of Delhi.

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