India’s $65 Billion Infrastructure Mess

For anyone who has spent time in India traveling a longer distance that it takes to get from an airport into a city or office complex, it quickly becomes abundantly clear that the country's infrastructure is not up to the task of getting materials and finished goods from the hinterland to ports for export (let alone distribution hubs for domestic consumption). I remember firsthand one trip years ago from Bangalore to Mysore where the I got a better workout holding on for dear life to our 4x4's safety handles than I did in the hotel gym the same day (and that was when traffic was moving).

Photo credit New York Times

Now, industrial research group CII and consultancy Amarthi Consulting have quantified the cost of India's wretched supply chain infrastructure on the overall economy. The Economic Times of India recently cites this survey, suggesting "a whopping $65 billion is lost every year on account of the inefficient supply-chain system in India" for the retail industry alone. By Spend Matters calculations, that's over 5% of India's GDP! Put another way, the report suggests "supply-chain costs in India are about 12-13 per cent of the GDP as compared to 7-8 per cent in developed countries." Just how outdated is India's infrastructure? Consider how "since Independence only 20 per cent capacity has been added to the railway network but the traffic has increased ten times."

Compared with China, which has spent much of the past decade in a mad dash to build out a combination of road, rail and port infrastructure to meet both domestic and global demand, India has continued to lose ground when it comes to its own infrastructure gap relative to other rapidly booming markets. We've all seen firsthand or in pictures the famous shot of a sacred cow in India holding up traffic, but what's particularly sad in the case of certain traffic jams is that cow, harnessed to a buggy, could probably move more quickly than trucks caught in typical inter- and intra-city traffic jams. Granted, China is going through its own growing pains, as a recent multi-day traffic jam outside of Beijing suggests (owing in large part to the hundreds of thousands of new vehicles put into service in recent quarters), but the supply chain infrastructure gap between the two nations could not be more clear.

Jason Busch

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