Comment on “Infrastructure and Connectivity in India: Getting the Basics Right”

• DOI: http://doi.org/10.1111/aepr.12146
• Author: Toshiro Nishizawa
• Date: 01 July 2016
• Published date: 01 July 2016

Comment on “Infrastructure and Connectivity

in India: Getting the Basics Right”

Toshiro NISHIZAWA†

Universityof Tokyo

JEL codes: H54, G2, O18, R42, R48

Singh and Kathuria (2016) give a good overview of India’s infrastructure challenges by

describing how inefficient and costly its infrastructure services are in India. The authors also

give clues for addressing those challenges and attempt to show ways to realize the potenti alof

connectivity in facilitating economic integration within India as well as with other developing

economies in Asia. While appreciating the paper’s findings, I would like to contribute to the

discussion by referring to some missing elements from a practitioner’s perspective.

My first point is related to the implications of connectivity. As is rightly recognized,

poor and high cost infrastructure services remain one of the most serious impediments to

India’s participation in global supply chains and its attractiveness as a destination for

foreign direct investment (FDI). Therefore, bridging connectivity gaps and reducing

cross-border logistics costs could be a necessary condition. But it is not necessarily a

sufficient condition for positive gains for Indian producers and exporters.

The poor infrastructure adverselyaffects the competitivenessof domestic firms through

high transport costs effectively imposed as “a tax on exports.”On the other hand, export-

oriented sectors in major trading partners could gain from India’s large domestic markets.

In fact, accordingto the Ministry of Commerce and Industry India’s imports from ASEAN

were $45 billion, while its exports remained at $32 billion in 2014/15. The merchandise

trade deficit has tended to widen in ASEAN’sfavor.

I would like to know how to reduce India’s high domestic logistics costs because of its

highly fragmented governance structure. Another question is how the services sector’s

strengthand potential could give Indiaa chance to enhance its tradingopportunities despite

the emerging constraints on information and communications technology (ICT)

connectivity. Better connectivity could expand India’s trade gains only when India’s

competitive disadvantages are corrected and advantages are maximized.

My second point is on the efficiency and effectiveness of infrastructure. Policy makers

should focus more on theefficiency and effectiveness of networkinfrastructure. We should

avoid just cheerleading the huge demand for infrastructure investment and financing.

Instead, we shouldshed light on the ways to allocatelimited resources among priority areas

with maximum efficiency and effectiveness to address India’spressingneeds.

†Correspondence: Toshiro Nishizawa, Graduate School of Public Policy, University of Tokyo, 7-3-1

Hongo, Bunkyo-ku, Tokyo 113-0033, Japan. Email: tnishizawa@pp.u-tokyo.ac.jp

doi: 10.1111/aepr.12146 Asian EconomicPolicy Review (2016) 11, 288–289

288 ©2016Japan Center for EconomicResearch

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