The economy of my village in Gujarat has changed dramatically in the past half century.  Many things have contributed to this – the shifts in land ownership, education, an entrepreneurial ethos in all communities, the development of infrastructure.  But of these many things the two that opened up truly new opportunities for the villagers are the all weather road that connected the village to the rest of the district and the coming of electricity. 

The road made possible a proper scheduled bus service. Because of this many villagers could take jobs in the factories that were coming up within commuting distance and were no longer obliged to work at low wages in paddy fields or mango orchards.  The road also allowed the village artisans to look to wider markets and not depend only on the modest demands of the few villages that they traditionally served. Electrification allowed them to raise their productivity and meet the larger demands of the wider market.  Of course electricity supply is erratic with frequent unscheduled cuts and low voltage.  But you realise the importance of electricity when you see the sudden frenzy of activity when the cry goes through the village “Bijli ayi” or, more accurately in my part of the world, “Batti avi”. 

The several carpenter families in the village quickly took advantage of electrification and installed simple machines that allowed them to produce the little wooden boxes required for fitting light switches. Later they started to make furniture for the new urban households who were flocking to the area to work in the new factories.  The blacksmith became an expert at repairing the vessels and tanks used in the many small chemical plants that were coming up in the district.  Within a generation, artisans whose forefathers had made and repaired carts and ploughs for a few villages became small scale industrialists who, today, employ several hundred people in the village.

Electrification also allowed the children in the village to study up to a high school level.  The light of the one or two bulbs that the family could afford made it possible for them to study at night.  Imagine the constraint on any form of higher education if the students have nothing but a weak kerosene lamp to read by at night. This opening of secondary education allowed many labouring families to move out of the fetters of their relationship with land owning classes.  Today the children and grandchildren of the former farm labourers work as teachers, electricity linesman, revenue department officials, skilled industrial workers, petty traders and a host of other activities that were never available to their forefathers.

The road has also connected the village to the wider world socially.  It is easy for the youngsters to go to town, catch a film and come back.  With electrification has come television and radio and now the cell phone.  And this too connects the village more firmly to the wider world.

This is the infrastructure revolution that really matters – the last mile that takes electricity and energy, transport, communication and information to every village and comunity in the country.   And to urban communities, particularly the poor in slums, where conditions are even worse – dwellings more congested, water less certain and more polluted, sanitation abysmal.

The great gaps in infrastructure are widely recognised.  The Planning Commission has drawn attention to the shortfalls in power supply, the slow improvement in the railways and highways, the more respectable improvement in telecommunications.  The Deputy Chairman of the Commission has been given super-ministerial responsibilities to accelerate progress.  Where should he begin?

Much of public discussions is on the perceived difference between India and other developing countries, particularly in Asia.  The cry is for what is described as “world-class infrastructure” that can support the rapidly growing aspirations of the urban middle class with their cars, refrigerators, airconditioners, shopping malls and air travel.  More broadly the focus is on mega projects for urban transportation, highways, skyscrapers, large ports and power projects.

For example, in a recent on-line article, an adviser to FICCI, expresses his anguish at the absence in India of anything comparable to the spectacular bits of infrastructure he saw in East and South-East Asia. He then asks for “…50 major expressways, 100 key bridges, a dozen airports, five key ports and logistic hubs, ten world-class cities with services that compare with the best in the world, 100 new townships, 20 convention centers, 30 mega power projects etc.”  (See article by Vivek Bharati in Express Online of 10 October 2004).  Is he aware of the fact that the exorbitant cost and poor economics of these showpiece investments was one of the factors behind the 1997 financial crisis?

India Inc. needs better infrastructure for energy, supply chain management and communications.  This requires investment in power, roads and ICT for productive purposes. But industry itself must understand that their future depends also on the last mile and that a substantial improvement there will open huge new opportunities for them.

There is no lack of trying. Infrastructure planning has been a major preoccupation of Yojana Bhavan since the beginning of planning.  We have moved from relying on the corrupt and inefficient state monopolies to an opening to the private sector.  In some areas like telecom, where new technologies have opened up new options, this is working.  In others we are still to see results.

Private investment is not the magic wand that will spirit away the demons of inefficiency and lack of access.  It will go to prosperous areas and lucrative applications where capacity utilisation and chargeable tariffs can lead to high returns. But the poorer areas will need to be served and even with service obligations in private licences, much of the burden falls on the public sector.  

Tariff reforms are difficult as the paying capacity of the poorer consumers sets a ceiling, which hits the public sector harder as it is generally the only supplier to these users.  Cross subsidisation has its limits, particularly if the prime consumers are taken over by the new private operators.  The situation is worsened by populist pressures for free power, new roads and bridges at the expense of maintaining existing ones and so on.  

The untidy cohabitation of the public and the private does not really solve the problem of the last mile. New modes of public private partnership are required.  For instance a combination of public investment up front combined with private sector service and maintenance.  We must empower local communities to take charge of local roads and electricity supply.  We must shift the subsidies away from centralised bureaucracies to local communities and give them the freedom to charge economic tariffs and raise local resources for maintenance. People are ready to pay for reliable power and useable roads. There was a time when this was tried for electricity.  But the experiment was hamstrung by requiring the cooperatives to charge no more than what the power board charged!

The real test for the new infrastructure committee chaired by the PM and managed by Yojana Bhavan is whether it can restore the focus on the last mile and begin from there to work out new modes of public-private partnership.