India Needs China’s Expressways

Play around with various city combinations for India and China in Google Maps, and the aboveshall almost certainly repeat itself. Indeed, while I am not sure about Google Maps' legend/key, the software (a screenshot is at the top of this article) blankets eastern China, where most of its population lives, with umpteen thick yellow lines but in India we see very few of those - Mumbai to Pune, Delhi to Lucknow, Hyderabad's Ring Road etc. These, I suspect, roughly correspond to that mythical creature for most Indian eyes: controlled-access, fast-speed, dual carriageway, multi-laned "expressways". These roads are not your mother's slow national highways (with many intersections) or your grandmother's super-slow-and-unsafe state "highways" (often just two-laned or worse).

Why are good highways (and where needed, bridges/sea-links) important? Visualize a simple example of an engineer in Mumbai or Chennai earning Rs 10 lakh(about $15,000) a year. She works downtown, and lives just five km away in a residential neighbourhood. For this "convenience" and given her large family, she pays half her salary in rent. If only she could live in the suburbs or that upcoming "twin city", she could instead pay just a quarter of her salary in rent and save or consume the additional quarter. However, the catch is that her one-way commute would triple from her current 30 minutes - that is, to one-and-a-half hours. Adding two hours of daily two-way commute for an additional Rs 20,000 a month may not be worth it.

But say our lady is in luck. Consider that a new peripheral expressway opens, or the existing bypass is widened and railed off - then a few miraculous things happen. First, increased speed means that the commute may just be twice as long now instead of thrice which may make the new trade-off worth it (one instead of two hours "wasted") freeing disposable income, increasing national investments and consumption when repeated and aggregated. Second, the company itself - or one of its competitors may decide to relocate to a location with lower rent and pass on some of the savings as higher pay. Third, along with more commercial development, more residential real estate with increased choice regarding price points and square footage is also created and the virtuous cycle continues.

While some urban planners and environmentalists see suburbanisation as sacrilege and want to focus on "walkable cities", the reality is that most people's revealed preferences (if not stated ones) are for bigger houses, all else being equal. What looks great for a tourist is not what works best for a resident, no matter how monotonous suburbia - whether in the form of standalone houses or apartment complexes - seems to outside commentators and experts.

Before cars and trains were invented, cities were even denser - and now that we are on the brink of driver-less or self-driving cars, it is only logical to expect even more spread out urban areas. This is because such cars would be much cheaper to use (either directly if you currently hire a Uber or taxi, or indirectly if you currently drive yourself given your cost of time.) With such cars only a decade or so away, even three hours of two-way commute may be acceptable to some (they may simply use it to catch up on some work or entertainment). Hence, rents would fall even further as a fraction of income (for the same size of homes.)

Now, the Bharatiya Janata Party(BJP)/National Democratic Alliance(NDA) government at the centre has always been relatively better at physical infrastructure; it is a bit of a cliche that "strongman" governments are better at imagining broad highways and interconnected rivers. However, all cliches contain a kernel of truth in them.

The Modi-Gadkari duo today is replicating what Vajpayee-Khanduri achieved with the Golden Quadrilateral. But we are still way behind China, which in turn has overtaken America, when it comes to its expressway network. Depending on how you count it - the official websites maybe slightly outdated - India has, give or take, around 1,000 to1,500 odd km of controlled access expressways (though even that seems to be an optimistic figure - see the third para in this piece)

China's and America's overall networks are also around 5 million kilometres long but their expressway networks are more than 100,000 km - hence, two to three per cent of their roads are expressways. While China's speed of execution has been remarkable, America is still ahead on a per capita basis.

More worryingly, unlike our ambitions when it comes to say renewable energy or the digital economy, our expressway ambitions are modest. Our total expressway length is stated to reach around 20,000 km by 2022 whereas China is aiming yet higher. At one level, this is understandable. While the government tries to underplay costs, a good expressway in India will cost US$2 million per lane per kilometre, including (very expensive) land acquisition and all the bells and whistles. This could be reduced a bit through models such as land pooling and cutting some corners, but we might as well create an asset that would last us for decades instead of being perennially behind the curve.

A very rough cost for 100,000 km of expressways even at six-lanes is $1.2 trillion - about half of India's GDP (real costs could be slightly lower since most highways won't be completely greenfield developments. Still no small amount, for sure.) Moreover while China may occasionally over-invest in a few highways or bridges to "nowhere", India (starting from a much lower base now and with a population that continues to grow) is far from that frontier.

Some innovative financing mechanisms are now being discussed. With the toll-operate-transfer (TOT) model being seriously considered by the government, existing highways built under the engineer-procure-construct (EPC) mode by the government can be monetized by selling toll rights to long-term investors for a fixed number of years. This will allow private and foreign capital such as pension funds, insurance companies, and university endowments to effectively finance India's expressway construction without increasing India's fiscal deficit or crowding out domestic capital excessively.

There are some quibbles of course - the investor will apparently be made responsible for maintenance (which they are likely to outsource to contractors) - it might in some cases be better for the government to simply seek pure financial equity. With the coming of investment infrastructure trusts (InvITs) and real estate investment trusts(REIT), each project can simply be listed and institutional investors can co-invest with retail ones. Of course, we should be open to a mix of all models, including the occasional government-to-government contracts (as is being discussed with UAE).

Another notable development is that the introduction of radio-frequency identification(RFID) chips on cars going forward should further help streamline toll collection. We then have the “perfect storm” to accelerate top-end highway development in India. Many in India have taken solace that we are "just" 10 to 12 years behind the Chinese growth story. But if we have just around 20,000 km of expressways by the middle of the next decade, then we are almost a generation behind. It is time to be more ambitious and get down to work fast.

The good news here is that Nitin Gadkari, probably India's best minister currently along with Piyush Goyal, is aware of the benefits of good highways. Gadkari says that he goes by John F Kennedy's quote: