India’s infrastructure woes, in two charts

August 6, 2012

Badly in need of repair (Rajesh Kumar Singh/AP)

Last week's massive electric-grid failure in India didn't just leave 700 million people without electricity for days. It also gave rise to a sharp debate on what the blackouts might mean for the future economic prospects of the world's second most-populous country. Over the weekend, Jonathan Shainin wrote a colorful dispatch for the New Yorker noting that the grid collapse provoked plenty of anxiety among Indian politicians about the country's status as a rising superpower.

But how shoddy is India's electric infrastructure, anyway? How does it compare with other nations? At the Peterson Institute for International Economics, Arvind Subramanian offers up a fascinating chart showing that the losses from India's transmission and distribution wires are far, far higher than they are for other countries like China or Brazil (for comparison, losses in the United States are about 7 percent):

Why is India's grid so inefficient? Charles Ebinger of the Brookings Institution provides one helpful overview here. One problem is that governments and utilities haven't invested sufficiently in the grid. That may be partly a consequence of the fact that the country has raced to build a truly jaw-dropping amount of infrastructure in the past few decades. Twenty years ago, just 42 percent of India's households had electricity. Today, that's up to 66 percent. (That still, however, leaves about 400 million people without power.)

But, Subramanian argues, poor governance is also to blame: "This ranges from corruption and venality—when politicians encourage power theft or diversion of power to their constituencies—to pandering politics in which politicians provide cheap or free power to farmers and other groups in exchange for support. There are also problems of power lost naturally in the process of transmission and distribution or when laws against theft are not enforced."

There's also suggestive evidence that an unreliable grid really is harming India's economy. In a study (pdf) from 2006, Subramanian and his co-authors found that states in India with more dependable grids also have far better economic track records:

It's not immediately obvious which way the causation runs. Perhaps states that are richer for other reasons can demand better infrastructure. Or perhaps unreliable grids are contributing to poor economic performance. (Case in point, a recent Bloomberg report noted that many Indian companies, like Tata Motors, have been forced to build their own power grids because they can't rely on the state.) Or maybe, as Subramanian argues, an iffy power grid is a symptom of poor governance, and states with poor governance also tend to have worse economic performance.

It's still not clear whether India's power woes will change anytime soon. Shainin's dispatch suggests that the blackouts are already stoking a backlash against the current government. And Subramanian points out that a few states, such as Tamil Nadu and Gujarat, are now trying to make their power sectors more reliable, either by investing in nuclear power or stemming the use of subsidized power or privatizing distribution lines.

There's also a running debate about whether India would be better off investing in less centralized forms of electricity. Reuters recently profiled a remote Indian village, Meerwanda, that sits independent of the national grid, harnessing solar panels to generate its electricity. One tantalizing possibility is that more and more villages could generate their own power, without relying on the government to string up wires.

Yet solar power will still account for just 1 percent of the country's electricity by 2022. Over at The New York Times, Andrew Revkin suggests that, for better or worse, large centralized power plants will remain the norm for years to come. As a rejoinder, however, Jigur Shah suggests that India simply can't quite afford to stick with large, centralized coal and nuclear plants. Those power plants are huge consumers of water, after all. And, in addition to its power woes, India is also facing the prospect of a crippling water shortage. Which means there aren't a lot of easy options here.

Update: Revkin collects some more smart thoughts here.

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Dylan Matthews | August 6, 2012