The internal opposition points to the challenges Singh faces in his latest drive to get the economy back on track as time runs out in the last lap of his term.
Last month, the government said it would set up an all-powerful umbrella body called the National Investment Board (NIB) to fix the chronic delays in implementing key infrastructure projects.
The government hopes that the board will be the final word on clearing any big infrastructure project worth more than $190 million — including railroads, power, steel, roads and ports. The plan would affect billions of dollars in initiatives that have been plagued by delays in winning approval, a labyrinthine process that requires multiple clearances from agencies responsible for the environment, land and relocating displaced people.
But the proposal is already running into criticism from officials handling issues of environment and from tribal groups who fear that an all-powerful super-cabinet for investment will override their authority.
The troubles point to Singh’s fragile control over his own colleagues. At a deeper level, the proposal has triggered fears among officials and activists that the government’s new urgency to arrest industrial slowdown may end up trampling many environmental and community displacement safeguards. They worry that it may undermine a system of checks and balances within the government that were designed to weigh competing priorities of environment, growth and traditional livelihoods.
After letting economic growth slip and fiscal deficit mount in the past two years, Singh’s government finally shook off its slumber and announced a slew of economic decisions since September to revive investor confidence.
Singh’s biggest worry is the sorry state of India’s infrastructure, where a number of domestic and foreign investments are stuck.
Among the many big-ticket projects that are stuck are a $12 billion project to manufacture steel by the South Korean company Posco, which has not acquired land yet; and an iron ore mining project by the European company ArcelorMittal, which has been waiting for forest department approvals for the past two years, stalling its nearly $12 billion steel plant.
A draft proposal for setting up the investment board was circulated among officials last month. It says that infrastructure projects face “inordinate delays” in procuring multiple approvals from different departments working autonomously.
As currently planned, the board would be chaired by Singh and have key infrastructure, finance and law ministers as members. The proposed board will scrutinize the working of other ministries that decide on granting or refusing approvals to investors and will help simplify rules. It will also step in to decide quickly if a ministry takes too long to grant approvals to a project. Investors can appeal to the board if their projects are stuck at various departments, as well.
“Are you going to enforce the laws meant to protect disadvantaged tribal groups or bypass them because of the urgency to boost economic growth?” Tribal Affairs Minister Kishore Chandra Singh Deo asked Friday in an interview in his office. “I am not against industrial growth, but growth at whose cost? Will you displace 200,000 people from their land just to make 20 people rich?”
India’s environment minister, Jayanthi Natarajan, shot off a letter to Singh calling the proposal “disturbing” and in conflict with the goals of her ministry.
Such arguments go to the heart of the some of the most stubborn problems that prevent India from pursuing Chinese-style industrial expansion.
Over the next five years, India hopes to invest $1 trillion in building infrastructure. Singh told his ministers this week that constraints including fuel supply and environmental approvals “currently deter or slow down this investment.”
The Mumbai-based Center for Monitoring Indian Economy estimated that infrastructure projects worth $34 billion were shelved or abandoned between April and August this year.
In June this year, the Indian government reported that 110 of 195 ongoing national mega-infrastructure projects were delayed.
“So many investments in infrastructure projects just remain on paper, they never get off the ground because the investors ultimately get frustrated with the delays and abandon their plans,” said Rajya Vardhan Kanoria, president of the Federation of Indian Chambers of Commerce and Industry, who wrote to Singh supporting the investment board. He said that similar measures have been taken in Malaysia and Brazil.
But India’s green activists oppose the investment-board plan and say environmental laws are being made the scapegoat for an ailing economy.
The Center for Science and Environment, an advocacy group in New Delhi, said that government has cleared forest land at an unprecedented pace for industry — about 489,000 acres in the past five years.
Some analysts, however, say that the NIB is not a magic bullet that will solve all the problems.
“Most large projects that face implementation problems are unable to acquire land and the NIB will not be able to help here,” said Mahesh Vyas, managing director and CEO of the Center for Monitoring Indian Economy. “Many investment projects are stuck because they were ill conceived. They presumed the easy availability of land or mines.”