Recently, Bloomberg reported that Indian Prime Minister Narendra Modi announced an infrastructure investment project for Mumbai worth over ₹294 billion (approximately $3.5 billion). The initiative aims to alleviate traffic congestion and create jobs, including the construction of roads, railways, tunnels, and freight yards.
Major Projects Launched
The Economic Times reported on the 13th that this round of investments focuses on key infrastructure projects like highways, railways, and ports, with the goal of elevating Maharashtra to a global financial powerhouse and maintaining Mumbai’s leadership in the fintech sector.
Mumbai, India’s economic hub, has long suffered from inadequate infrastructure and severe traffic congestion. Over 60% of the population lives in slums alongside high-rise buildings, highlighting the city’s stark contrast between affluence and poverty. Despite having the colonial-era central railway station, Mumbai’s suburban trains run slowly.
In the past decade, Modi’s government has heavily invested in infrastructure, resulting in some improvements in Mumbai. This year, several major projects commenced to bridge the gaps, including the opening of India’s longest bridge, the Mumbai Trans Harbour Link, the construction of a coastal road in the southern part of the city, and the partial operation of new metro lines. According to Bloomberg, over the next two years, new infrastructure projects worth ₹4.44 trillion will be launched in Mumbai, equivalent to the total value of projects built in the past 11 years.
Years to Complete
The infrastructure investment in Mumbai is only part of Modi’s ambitious “Big Infrastructure Plan.” Over the past decade, Modi’s government has massively upgraded infrastructure across India, including highways, railways, and airports, while also heavily investing in digital infrastructure. According to Bloomberg’s report in May, Modi further promised during the election campaign to launch a massive infrastructure plan in the next two years.
Large infrastructure investments are also seen as the core of “Modinomics 3.0.” Besides infrastructure construction, “Modinomics 3.0” includes digital network development and clean energy utilization.
Qian Feng, Director of the Research Department at Tsinghua University’s National Strategy Institute, told reporters on the 15th that India’s infrastructure development has started from a very low base. For decades, insufficient investment has caused severe problems with outdated railways, poor-quality roads and ports, and unstable power supplies. As a federal system, India’s fragmented political structure also complicates coordination between states on transportation links. Projects can often be halted at state borders due to differing opinions, creating “dead-end roads,” and resolving these differences can take years.
“Objectively, some of India’s infrastructure has improved, but due to a weak foundation, historical debts, and poor project management, India’s overall infrastructure remains relatively underdeveloped, posing a significant constraint on economic development,” Qian told reporters.
A survey by the Hindustan Times in February indicated that nearly half of the 1,788 major infrastructure projects supervised by the federal government are behind schedule, with cost overruns of about 17%. India’s logistics costs account for 18% to 20% of total production costs, compared to 8% to 10% in China.
Political Risks to Watch
Indian media report that Modi’s infrastructure plans face numerous challenges, including high logistics costs, urban traffic congestion, and environmental issues. Critics argue that while new highways and high-speed rail projects have garnered praise from the business community, opponents claim these are “flashy projects that do not benefit the poor.”
Funding for these projects also poses a risk. In December, the International Monetary Fund (IMF) warned that India’s public debt could lead to “massive financing needs.” Qian believes that as Modi begins his third term, continuing the current infrastructure investment policy is inevitable, but the major challenge is funding. Currently, India’s public debt-to-GDP ratio is about 85%, and the IMF predicts it could exceed 100%, presenting a significant fiscal challenge.
Qian also noted that Modi has shown a clear preference for business tycoons like Adani and Ambani in infrastructure projects, leading to criticisms of “crony capitalism.” Infrastructure projects often take a long time to generate returns. If current returns and profitability are low, attracting large-scale international investment will be difficult. “If the development model continues, with the government assigning infrastructure projects to a few selected industrial enterprises, and implementing the ‘national champion’ model, it could lead to financial and economic risks, and even political risks,” Qian said.
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