Development Watch – Week #4 June ’23
Development News
Urban migration changing idea of Rural India
Rise of “rurbanism” is one of the major reasons for the changing structure of Rural India and its impact on urbanization. Migration to cities in search of work has meant a two-way transfer of resources. This means labour going to cities, and remittances of money to villages. However, equally important is the transfer of ideas and concepts, which leads to “rurbanism”. The changes that we see in India’s countryside of the 2020’s have been due to 70 years. It is still a work in progress. Rurbanism is a process that integrates the urban with the rural. This leads to development and use of resources and opportunities that impact both rural and urban spaces.
Better access to public amenities such as electricity, LPG, water and toilets in villages, some of the urban-rural divide has been bridged. This is creating opportunities for non-farming livelihoods. There is growth of emerging rural (ER) and developed rural (DR) centres. Rising incomes have led to higher proportion of middle-class and upper-income households. There is now a higher percentage of rich households in DRs (21%) than in boom towns and cities (18%). Rest of urban India only has 12% rich households. Policy interventions such as Provision of Urban Amenities in Rural Areas (PURA), which was relaunched in 2012, was remodelled as the National Rurban Mission. They have helped both exploit and shape rurbanism to bridge the rural-urban divide.
India’s roads network grew 59%in last 9 years
India’s road network has reached 1,45,240 (1.45 lakh) km in 2023 from 91,290 km in 2013-14. Developments have happened across all sectors, which have changed the picture of the country. India’s road network has now become the largest after the US. In the last 9 years, the 4-lane National Highways have increased about two-fold to 44,654 km from 18,371 km in 2013-14. Revenues from tolls has also risen from Rs. 41,324 crores in FY23 from Rs. 4,770 Cr in 2013-14. Usage of FASTags has reduced waiting time at toll plazas to 47 seconds.
More than 650 roadside facilities are being developed to provide a pleasant experience along the highways. Under NHAI’s INviT, a bond issue was launched and was oversubscribed 7 times on Mumbai Stock Exchange within day 1. Road and transport Ministry has also utilized 30 lakh tons of garbage in road construction for Delhi Ring Road project. Introduction of bamboo crash barriers, which provide enhanced strength and durability while generating employment opportunities.
Boeing to invest in Infrastructure and Pilot training in India
Boeing is investing $100m in infrastructure and training programmes for pilots in India. This follows the country’s Air India placing firm orders for more than 200 jets. This includes 20 numbers of 787 Dreamliners with Boeing earlier in the week. This week, Indigo placed an order for 500 narrow-body planes with Airbus. India’s newest airline, Akasa Air, also ordered four additional 737-8 jets from Boeing during the Paris Air Show. Both Boeing and Airbus have mammoth tasks to build planes struggling with various issues from engine problems to semiconductor shortages to glitches.
PM Modi flags off 5 Vande Bharat trains
The Prime Minister would launch 5 Vande Bharat trains on June 28 on routes such as Bhopal-Jabalpur, Khajuraho-Bhopal-Indore, Goa-Mumbai, Dharwad-Bengaluru and Hatia (Ranchi) – Patna. With this, the total number of Vande Bharat trains in the country is now 24. The Khajuraho-Bhopal-Indore Vande Bharat train will be about 2 hrs 30 min faster than the fastest existing train on the route. Madgaon (Goa)-Mumbai will be Goa’s first VBE. It will run between Mumbai’s CST and Goa’s Madgaon station. It will cover the journey in 7:30 hrs, which is 1 hour faster than current train. Hatia-Patna VBE will be the first between Jharkhand and Bihar. This is again faster by 1:20 hrs.
Institutional investment in Indian realty sustains pace despite global headwinds
Indian real estate has attracted over 2.6 billion during the first half of January-June. Momentum of investments inflow is expected to sustain and top $5 billion in 2023. It is led by office, warehousing and data center assets. Office properties at 68% accounted for the largest share of all PE investments worth $2.6 billion. This was followed by warehousing at 21% and residential at 11% share, according to Knight Frank India. The real estate sector witnessed 22 transactions with $2.9 billion investments. Average deal size of investments has increased by 17% to $134 million as against $115 million. Looking ahead, the office sector is expected to remain favorite among investors. Healthy response to India’s first retail Real Estate Investment Trust (REIT), Nexus Select Trust indicates a positive investment environment. Based on Knight Frank’s investment forecasting model that considers factors such as government investment, currency fluctuations, inflation, interest rates, and office supply.
Improved awarding and execution to benefit road construction companies
Improved execution of rod projects in India is expected to benefit construction companies. Especially KNR constructions and PNC Infratech with superior execution capabilities. Combined construction of roads by NHAI and MoRTH improved to 6,684 km in Jan-May 2023 from the previous year. If the present momentum in road construction continues, average length of roads made per day will jump to 33 km in FY24. Among the road construction companies, KNR Construction and PNC Infratech are likely to benefit from higher awarding of road projects. This is mainly due to their strong balance sheet and superior execution capabilities. Their revenues may grow by 12-15% in the next two years.
New draft rules for Green Credit programme
The programme envisages to create a mass movement around environment positive actions. The main objectives of the Green Credit Programme are to create a market based mechanism for providing incentives. This is in the form of Green Credits to individuals, farmer producer organizations, cooperatives, forestry enterprises, sustainable agriculture enterprises. This would also include those green credits being developed at the level of urban and rural local bodies, private sectors, industries and organizations. Green credits will be tradable outcomes and will act as incentives.
World Bank approves loan to Himachal Pradesh
The World Bank has approved a loan of $200 million for Himachal Pradesh government in India. This would support power sector reforms and increase the share of renewable energy in the state. The loan will contribute to adding 10,000 Mega Watts of renewable energy capacity. This would include 150 MW of solar capacity, and help reduce green house emissions. The program aims to introduce technologies such as demand response management and seamless access to renewable energy. The $200 million loan has a final maturity of 14.5 years, including a grace period of 4.5 years (10+4.5 years). It will help introduce advanced technologies like “Demand Response Management System”.
Norwegian Climate Investment Fund to invest in Wind Power
Norway’s largest pension fund, KLP, and state enterprise Norfund, are providing a loan to Enel Green Power. It is an equity and loan guarantee totalling Rs. 4 billion ($54 million). It is for a 168 MW wind power project in Gujarat. Enel has a 25-years power purchase agreement and the facility is expected to produce approximately 700 Giga Watts Hour per annum. This would avoid approximately 573,000 tonnes of carbon dioxide per year. In July 2020, Norfund and Enel Green Power entered into a joint investment agreement for renewable energy projects in India. In 2022, India’s power output grew at the fastest pace in 33 years. Coal fired power output grew by 12.4%.
Small-scale solar firms being eclipsed
India’s small-scale solar manufacturers and service providers are floundering. This is due to entry of larger companies, costly on-site checks, strict tender rules being imposed by states, mandatory certifications are introduced and regulations around quality control are being tightened. Many smaller firms are diversifying, shutting down or downsizing. The market is being consolidated in the hands of a few big companies. Benefits of the booming sector are also being lost. Firms at the bottom of the supply chain are plagued with delayed projects, delayed payments and a lot of uncertainty. India’s 60 million MSMEs generate largest amount of employment after agriculture. They also foster entrepreneurship at a lower capital cost than large-scale manufacturing.