How India’s Gati Shakti Plan can have an impact beyond its borders

(Constantino Xavier, Riya Sinha write: It can generate positive spillover effects, strengthen India’s economic ties with its neighbors.)

The Gati Shakti National Master Plan is another important step for India to upgrade national infrastructure and multimodal connectivity. According to the Economic Survey 2019-20, India will have to invest approximately $1.5 trillion on infrastructure to become a $5-trillion economy by 2024-25. However, while the Rs 100 lakh crore plan will have an important economic multiplier effect at home, it must also be leveraged to have an external impact by aligning it with India’s regional and global connectivity efforts.

The Gati Shakti plan has three main components, all focused on domestic coordination. First, it seeks to increase information sharing with a new technology platform between various ministries at the Union and state levels. Second, it focuses on giving impetus to multi-modal transportation to reduce logistics’ costs and strengthen last-mile connectivity in India’s hinterland or border regions. The third component includes an analytical decision-making tool to disseminate project-related information and prioritize key infrastructure projects. This aims to ensure transparency and time-bound commitments to investors.

One way to look at the Gati Shakti plan from a foreign policy angle is that it will automatically generate positive effects to deepen India’s economic ties with Nepal, Bhutan, Bangladesh, Myanmar and Sri Lanka, as well as with Southeast Asia and the Indian Ocean region. This has been the experience in recent years with India’s investment in roads, ports, inland waterways or new customs procedures generating positive externalities for these neighbors, who are keen to access the growing Indian consumer market.

Nepal, for example, in 2020 reached record export levels due to a series of Indian connectivity initiatives, including electronic cargo tracking systems, new rail and road routes, modernization of border control systems, and the region’s first-ever bilateral petroleum pipeline. Any reduction in India’s domestic logistics costs brings immediate benefits to the northern neighbor, given that 98 per cent of Nepal’s total trade transits through India and about 65 per cent of Nepal’s trade is with India.

By reducing the cost and time of doing trade through infrastructure modernization at home, India will continue to have a positive impact on the price of commodities and developmental targets in neighboring countries. In 2019, trade between Bhutan and Bangladesh was eased through a new multimodal road and waterway link via Assam. The new cargo ferry service with the Maldives, launched last year, has lowered the costs of trade for the island state. And under the South Asia Subregional Economic Cooperation Program, India’s investments in multimodal connectivity on the eastern coast is reconnecting India with the Bay of Bengal and Southeast Asia through integrated rail, port and shipping systems.

However, India can’t just rely on the plan’s automatic spillover effects. Connectivity plans at home include important strategic decisions that will impact India’s external economic relations, not only in South Asia, but also with Southeast Asia and the Indian Ocean region. Whether it is the alignment of a cross-border railway, the location of a border check post, or the digital system chosen for customs and immigration processes, India’s connectivity investments at home will have limited effects unless they are coordinated with those of its neighbors and other regional partners.

For instance, with its land neighbors, India’s border check posts, known as Integrated Check Posts (ICPs), only have mirror infrastructure with Nepal. Other key ICPs, such as the one at Petrapole with Bangladesh, face regular congestion due to lack of complementary infrastructure across the border. Similarly, countries in South Asia use different digital systems that have hindered real-time information sharing. While India recently joined the Transports Internationaux Routiers (TIR) convention, which facilitates cross-border customs procedures, none of its neighboring countries in the east has signed on to it.

There are three avenues for India to ensure that the Gati Shakti Plan has maximum effect. First, India will have to deepen bilateral consultations with its neighbours to gauge their connectivity strategies and priorities. This is not just a technocratic exercise of coordination and harmonization. Given political and security sensitivities, India will require diplomatic skills to reassure its neighbors and adapt to their pace and political economy context.

A second way is for India to work through regional institutions and platforms. SAARC’s ambitious regional integration plans of the 2000s are now defunct, so Delhi has shifted its geo-economic orientation eastwards. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) has got new momentum, but there is also progress on the Bangladesh, Bhutan, India, Nepal (BBIN) Initiative. Working through these multilateral platforms will help India develop a regional vision and standards for connectivity, reducing bilateral transaction costs.

Finally, India can also boost the Gati Shakti plan’s external impact by cooperating more closely with global players who are keen to support its strategic imperative to give the Indo-Pacific an economic connectivity dimension. This includes the Asian Development Bank and the World Bank, but also Japan, the US, Australia, EU and ASEAN. They come with expertise and expectations about connectivity standards, whether it is on e-commerce, environmental and social impact assessments of infrastructure or technology platforms. These external connectivity dialogues will give the Gati Shakti plan a truly regional and global dimension and help India achieve its developmental targets at home.

This column first appeared in the print edition on November 9, 2021 under the title ‘The connectivity effect’. Xavier is a fellow and Sinha a research associate at the Centre for Social and Economic Progress, New Delhi.

Source: The Indian Express