MUMBAI- Manufacturers who set up shop in India in the 1990s often joke they didn't just have to build factories back then, but also roads because it was faster than waiting for the state to build them.

Today, India has the world's second largest road network at 3.4 million km (2.1 million miles). And the national highway network, which doubled in size between 1997 and 2007, stands at an impressive 70,000 km (43,500 miles).

But is that enough?

Some say it isn't: transporters complain the quality of roads isn't up to scratch; most highways still have just two lanes and many roads are just paved and not made of concrete.

We have the best trucks, the most advanced technologies, but what is the use when our roads are so bad? said Ashwin Agarwal, a transporter with a fleet of more than 80 trucks that criss-cross the country.

I can never accurately say when the trucks will reach. Invariably, there are delays because our roads are so bad. We need better roads, better infrastructure, it's the need of the hour.

Agarwal's trucks, packed with auto parts, cover about 350 km (217 miles) a day, or roughly half the distance trucks can normally do on good roads. But he says his expenses are much higher because of greater wear and tear on those roads.

IMPROVING INFRASTRUCTURE

After years of neglect, the Congress-led government voted back to power in May is pushing to build 20 km (12 miles) of roads each day as part of its plans to improve infrastructure in Asia's third-largest economy.

Analysts estimate poor infrastructure shaves an estimated 1 or 2 percentage points off India's annual economic growth, which slowed to 6.7 percent in 2008/09 after three years of 9 percent or more growth.

India needs to spend $500 billion in the five years to 2012 to overhaul its congested ports and airports, fix its potholed roads and generate more power, the government has said.

Power and roads are expected to lead infrastructure growth, but road construction has been hamstrung by bureaucratic red tape, funding difficulties and land acquisition hassles, which have put off investors and slowed movement of goods and people in a country where roads carry 70 percent of freight and passengers.

Nobody doubts the size of the road development opportunity, but there are challenges at every stage, said analyst Nitin Bhasin at Noble Group, which rates state highways and roads a better investor bet because of better planning and execution.

Building 20 km a day is highly ambitious, given the lack of an enabling ecosystem, and especially when considering even China fell short of that with decades of building experience.

CONSTRAINTS

The World Bank says infrastructure limitations are India's most serious constraint to growth, and the most serious limitation to rapid poverty reduction.

About a decade ago, about 40 percent of India's 825,000 villages lacked all-weather roads.

Under a $34-billion programme partly funded by the World Bank, some 375,000 km of new rural roads will be built until 2010 and nearly the same length improved.

The results are showing already, said Ashok Kumar, senior highways engineer of the World Bank in India: household incomes have jumped by half or even doubled, crop yields have nearly tripled and literacy rates have improved.

For every 1 million rupees ($22,000) spent on rural roads, 163 people are lifted out of poverty, the World Bank estimates.

Rural roads are a primary requirement for overall growth and development. We cannot afford to neglect them, Kumar said.

But the roads sector is plagued by poor planning and execution, corruption, and huge time and cost overruns: the outer limit of time extension for contracts in the UK is 25 percent, while in India it is about 70 percent, the World Bank estimates.

About 40 percent of road contracts have cost overruns of 25-50 percent, and about 90 billion rupees are locked up in disputes and arbitration.

There is also a shortage of labour: India has 110,000 highway engineers compared to more than 500,000 in China in 1989-97.

Land acquisition is a big challenge, with most tracts of land in India lacking clear title deeds, and growing opposition from farmers against use of land for industrial purposes.

The other major issue is funding; India needs $70 billion for building roads over the next three years, the government says. About half of that is expected to come from foreign investors.

After a series of roadshows abroad, the National Highways Authority aims to get in bids for 6,563 km (4,078 miles) of road projects worth $12 billion in the year to March.

An improving economy and revived interest from foreign and local investors augur well, and developers will gain in experience and confidence as they build more roads, said Tushar Poddar, economist at Goldman Sachs.

Goldman Sachs , Morgan Stanley, Standard Chartered Macquarie, and private equity giants Kohlberg Kravis Roberts and 3i are among the global firms with investments in Indian infrastructure.

Will we get to 20 km a day? I don't know. But roads will be built -- with the participation of a lot of local and foreign investors, said Narayan Ramachandran, country head, Morgan Stanley in India.

Transport Minister Kamal Nath has announced a slew of measures including reviewing the process of offering and bidding, changes to the concession and land acquisition agreements, faster approvals and more public-private partnerships.

These have gone down well with Ajit Gulabchand, chief executive of Hindustan Construction Co, which has built more than 2,300 km of highways and 300 bridges, including a cable-stayed bridge in the sea off Mumbai, inaugurated earlier this year nearly 10 years after it was first conceived.

I feel optimistic. I think the targets are achievable, said Gulabchand, whose company is bidding for new road projects.

The money will come. And barring a severe downturn or other unforeseen hiccups, the plan should work. ($1 = 46.4 rupees) (Editing by Sugita Katyal)

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