India Is Racing To Build World-Class Roads As It Looks To Turbocharge Growth

India is on a road-building spree, adding world-class highways connecting its major cities and ports and expanding its existing road network, as the world's fastest-growing economy tries to reduce logistics costs to make itself a more attractive destination for manufacturers looking to move out of China.

Prime Minister Narendra Modi announced last month a 33% increase in infrastructure spending. His government has allocated about $1.4 trillion in infrastructure investments until 2025. "We believe that before the end of 2024, under the guidance of the prime minister, we will try our best to make India's road infrastructure at par with America," Union Road and Transport Minister Nitin Gadkari said then. The country needs to build 60 kilometers of roads a day to hit that target, and it has already hit half of that.

As part of the government's ambitious project to build 26 green expressways in the next three years, it opened the first section of the Delhi-Mumbai Expressway last month — the country's longest expressway stretching 1,400 km -connecting the capital New Delhi to the financial hub of Mumbai. The $13 billion project is expected to cut down the travel time between the two major cities to around 12 hours, around half of what it is now. Apart from saving 300 million liters of fuel a year, the green expressway — equipped with electric vehicle charging stations and with dedicated lanes for EVs — is estimated to reduce 800 million kilograms of carbon emissions every year.

"Investments in railways, highways, subway lines and airports are key to pushing the country's growth rate, attracting more investments and creating fresh jobs," Modi said during the opening of the expressway, calling it a "sign of developing India."

Better roads for lower logistics costs

Experts say that new transportation infrastructure will boost the economy by cutting down the cost of doing business and increasing speed and convenience.

"A well-planned road network will connect demand centers with supply nodes," Biju Mohan, a senior supply chain Manager at Catch Australia told International Business Times (IBT). "This will create a high impact, particularly in the agricultural sector where products have shorter shelf-life. Better road systems will also improve predictability for the transportation network, and reduce costs to businesses."

India has 6.37 million kilometers of roads, making it the second-largest road network in the world. Its national highways account for 2% of the total road network and carry over 40% of total traffic. The roads also carry 85% of India's passenger traffic and transport 64.5% of all goods and commodities, contributing 3.6% of the Gross Domestic Product.

By expanding the road network, India aims to lower its logistics costs to the global standard of around 8-9% of GDP.

"The international trade of a country depends heavily on its logistics infrastructure," Rofin T.M., an assistant professor at the National Institute of Industrial Engineering, Mumbai, told IBT. The institution is the nodal hub for capacity building in logistics and supply chain management.

"Logistics performance can improve supply chain reliability and predictability, thereby reducing uncertainties involved in business operations," he added.

Invest India, the country's investment promotion and facilitation agency says the development of road networks will have an immediate impact on employment and manufacturing. "Developing highways and road networks will lower local pollution levels, increase environmental safety caused due to heavy traffic congestion, encourage weekend travel, and reduce traffic jams," the agency says.

Realizing the need for the speedy movement of cargo from and to port premises and to avoid congestion, the road transport ministry has dedicated 15 projects with a total length of 352 kilometers in the last quarter of FY2023. The country currently has 55 port connectivity projects with a total length of 2,772 kilometers.

'Perfect time for global investors to come in'

That this road-building spree is happening under India's transport minister Nitin Gadkari is no coincidence. He was the man, as a minister in the Maharashtra state government, who advocated private investment in infrastructure projects and saw through the completion of the Mumbai-Pune Expressway in 2002, kick-starting the road-building boom in India.

As a minister in Modi's cabinet, he introduced a hybrid annuity model for infrastructure projects in 2016 to attract more private investment in road projects at the national level. Investors also get a slew of benefits, including a 100% tax exemption for five years and 30% relief for the next five years. And the government introduced stock-market traded investments called Infrastructure Investment Trusts (InvITs) in 2017 to encourage small investors to invest in infrastructure projects.

"We will try to make India's highways at par with America's by the end of 2024," Gadkari said recently.

Rofin, who is researching e-commerce supply chains, observed that it is the perfect time for global investors to consider funding Indian infrastructure projects. "It is promising to see developing countries such as India transform their logistics infrastructure through mega projects such as the Industrial and Dedicated Freight Corridors, Bharatmala and Sagarmala," he said, adding these and other government initiatives are accelerating logistics infrastructure development and subsequent employment generation in the $200 billion logistics sector.

"The increased application of analytics and digitization is making Indian supply chains competitive and resilient, attracting sizeable foreign direct investment," he said.

In one such example, the Ontario Teachers' Pension Plan Board, along with global investor KKR, invested $375 million to acquire a portfolio of toll roads in India.

"Ontario Teachers' Pension Plan's (OTPP) investment into National Highway Authority of India InvIT is a perfect match of long-term capital with the growth-oriented, GDP-linked opportunity that the Indian roads sector provides," Suresh Goyal, MD and CEO of National Highways Infra Investment Managers Private Limited, said. "OTPP was able to secure an anchor investor position in one of the largest potential monetization of road assets in Asia."