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Most policymakers should feel disturbed at the concerns being expressed by some foreign investors about the economy’s infrastructure; none should be surprised if such worries gain ground as the economy attempts to open up investment opportunities. A little over a year ago, the head of Siemens in India complained of the poor quality of infrastructure in Bangalore and planned to shift new capacities to Gujarat. Now it is the turn of Japan’s second largest trading firm, Mitsui, to favour China on account of the poor quality of roads, ports and power shortages in the country. How seriously should the prospective loss be taken?

Policymakers would do well not to dismiss Mitsui’s reaction as one firm’s investment bias that might have been based on other considerations as well. Patchy roads, power shortages and antiquated port facilities have become a way of life for domestic producers to such an extent as to breed overall complacency that the policymaker can ill-afford anymore. The rapid growth over the past four years has largely been services-driven — which the telecom reforms of the past decade provided the infrastructure for — and later manufacturing that has stretched the infrastructure to bursting point; the strains are beginning to show in the increasing power shortages, breakdown in civic amenities, and so on. Admittedly, the Government has recognised the problem and the Eleventh Plan has put a figure on the kind of resources that will be needed to get roads, ports and highways equipped for the next phase of growth. But New Delhi has paid only lip service to a problem that had remained hidden all these years.

The market for land had been recognised as illiquid for many decades, but it is only recently, with the demand for agricultural lands for industry increasing and the resistance to land acquisition erupting in various states, that the extent of confusion about transfers and acquisitions has become evident. Land acquisition has become a political and emotional issue but an even more pressing problem is the ambiguity in titles. That the quality of land records is dismal was recognised by New Delhi that assures States low-cost funds for urban renewal on condition such records are reformed.

A land market with clear and enforceable titles, encoded in records maintained by the latest technologies that would help reduce corruption is the most essential reform that would go a long way in changing the negative impression of India’s poor governance. It would also clear the path for better roads and highways.

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