Adani Institute of Infrastructure Management (AIIM)
(As prepared for delivery)
There cannot be a better time than now, and a better place than India, for talented young people to specialize in the field of infrastructure.
What the poet William Wordsworth said, about the early days of the French Revolution which caught the world’s imagination, holds true today in India:
Bliss was it in that dawn to be alive,
But to be young was very heaven!
As you know, India is emerging as a global economic powerhouse, with a GDP that is now ranked fifth in the world, and third in PPP terms. And India has ambitions for much greater growth – and for better lives for its people.
The creation of sustainable, resilient, and intelligent infrastructure is key to realising these national aspirations. You can thus take pride in the fact that you will be the builders of a new India.
The first wave of building pan sub-continental infrastructure took place during the colonial rule. Then, free India took up the monumental task of creating the landscape of civil infrastructure that has knit India together as a great nation: large dams, irrigation canals, national highways and roads, power plants and transmission lines, ports, and airports.
Much more needs to be done to complete this task. There is the need to enable better road and rail connectivity, improve water and power transmission networks, and enlarge air routes. However, the earlier paradigm of infrastructure-building, driven primarily by engineering approaches, as exemplified by one of India’s greatest engineers, Vishveswarayya, may no longer suffice.
The challenges before you, who will be creating India’s next-generation infrastructure, will, in my view, span three domains.
The first key to creating next-generation infrastructure is sustainability. The days of implanting mega-projects on a landscape without considering the costs and consequences on neighbouring communities, on nature and the physical environment; are in the past. For a project to be truly sustainable, planners need to transcend the traditional balance-sheet approach of assessing project viability and impact. They need to move beyond the concept of financial rate of return – to economic rates of return. These are challenges that young practitioners like you will increasingly need to address. The Environmental, Social, and Governance [ ESG] approach and tools that are being used by many socially conscious firms would need to be adopted in the realm of infrastructure too.
The second focus area while creating next-generation infrastructure is resilience. Given recent climate-change induced events like floods and droughts, and mutating weather patterns, new infrastructure needs to be more resilient, and capable of functioning optimally in the face of weather abnormalities. Designing resilient infrastructure requires skills that span many disciplines, from climate-science to statistics.
And the third big theme is that next-generation infrastructure will be shaped by the infusion of intelligence: infrastructure assets of the future, which will be capable of communicating with us. These assets will be more responsive to varying consumer demands and more amenable to multi-user, dynamic utilization. They will be more economical to maintain; as well as safer with better preventive maintenance.
We are thus seeing a new information revolution in the infrastructure sector happening right before our eyes. This development combines immense possibilities of connecting every inhabitant instantaneously with each other. Combined with the tools that we now have to collect, curate, and convey large amounts of data, we will see the benefits of embedding intelligence into objects, using the Internet of Things.
Along with the possibilities provided by these new technologies, there is also a profusion of risks – as in the threat of cyber-attacks on rail transit and air transport systems; and these are areas where specialists like you need to increasingly focus on, to make our world a safer place.
Thus, the challenges inherent in creating the next generation of infrastructure will require much more from young people like you, a greater variety of skills, the ability to think creatively, cutting across a variety of knowledge-domains, and most importantly, nimbleness of thinking.
In India, the creation of infrastructure is at the heart of national development for two reasons.
First, infrastructure spending is vital for job creation today, one of India’s biggest challenges. Second, new infrastructure is important for increased productivity that directly translates to higher incomes and greater competitiveness.
The size of India’s total infrastructure needs has been captured in a recent Economic Survey of the Government at USD 4.5 trillion, which is one-and-a-half times the current GDP.
Annually, India would need to spend nearly 10% of the GDP on infrastructure-creation, which would imply a doubling of the current quantum of annual investment of about 100 billion USD. The Union government has recently announced the National Infrastructure Pipeline, comprising an array of projects ranging across sectors like power, health, transportation and urban infrastructure.
In the energy sector, while the filling of the national demand-supply gap has been a great achievement, the next big challenge is India’s ambitious plan to become a world leader in Renewable Energy by attaining Prime Minister Modi’s ambitious goal of generating 175 GW of RE in the next three years. In this context, one must applaud the Adani group’s commitment to Renewable Energy, aiming to be the world’s largest solar power entity by 2025.
Moving on to transportation, some of you will hopefully go on to build careers in the aviation sector: India is one of the most dynamic aviation markets in the world, growing at a CAGR of over 20%.
I’m hopeful that many of you will specialize in the area of urban infrastructure. This is central to improving the quality of lives of our increasingly urbanizing population. Satellite data reveals that around 60% of India’s population live in settings that are urban in form. The infrastructure challenges in India’s cities span the entire spectrum, from access to clean water and affordable energy, to convenient transit.
One of the most exciting developments in the infrastructure landscape, with tremendous potential for boosting economic growth and for improving livelihoods and lifestyles, is the increasing ubiquity of ‘invisible infrastructure.’ We see this in the proliferation of smartphones and in the access of every village to the internet. Invisible Infrastructure has the potential to multiply access – to livelihoods, healthcare, knowledge – even for the remotest communities.
Today, the presence of government looms large in India’s infrastructure, both in terms of setting the policy and regulatory boundaries, as well as being the primary funder. Private sector investment into the sector has declined to only around 20% of total expenditure. A key challenge therefore is to revive private investment. We will hopefully soon see some policy initiatives from the government, ranging from the formation of new non-banking financing entities, to measures to incubate infra-bond markets, as well as steps to redesign the entire policy architecture surrounding PPPs as recommended by the Vijay Kelkar committee.
As we know only too well, many mega-projects have tended to exceed planned timelines, due to delays in land-acquisition, and inadequate financial planning; and more broadly on account of the VUCA environment of Volatility, Uncertainty, Complexity, and Ambiguity that we live in. Infrastructure-creation is equally a management challenge. An area that needs improvement, and where the skills of specialists like you are increasingly required, is to improve the quality of project planning. In India, the average spend on the preparation of a Detailed Project Report is only around 2% of the project cost, as against 6 to 9 % in the US.
It might interest you to know that in KPMG, we have a very strong group that specializes in the efficient oversight over the execution of infra projects, called the Major Projects Advisory practice. We are assisting the government of Telangana in one of the largest lift-irrigation projects in the world, called the Kaleswaram project. We also assist both public sector and private companies execute major power generation projects on costs, and within time targets.
In sum, there cannot be a better time for infrastructure specialists like you to go out into the market and embark on new careers. India is undoubtedly one of the infrastructure hotspots of the world, given the large infra deficit that the country needs to overcome, as well as the talent that young India possesses for the creative and adaptive use of new technologies.
The potent combination of net everywhere, mobile phones for all, AI, and the benefits of access to big data will combine to turbo-charge the opportunities you will encounter and enjoy.
Given the increasingly complex demands of creating modern-day infrastructure, let me reiterate that a multiplicity of skills will be required for infrastructure specialists like you in the days ahead. These will span many realms, going beyond pure engineering: project structuring skills that encompass ESG aspects, financial-architecture abilities that comprehend the entire spectrum of costs and benefits, and techniques for infusing agility into project architecture as well as project oversight.
I have no doubt that all of you will be more than equal to these demands, which are so critical for building India of your dreams.