What are you smoking Mr Gadkari (and can I have some)?

Of all the topics covered in this blog, India’s highway construction programme attracts the most yawns from friends and family (and the least interest in social media). But apart from its intrinsic importance and the resonance that highway construction programmes have long had in discourses of modernity — think the New Deal and Hitler’s autobahns — it also offers a good advance indicator of a government’s project execution abilities. And the Modi model involves claims about effective execution, if nothing else.

Which may be why the Modi government persists in making patently false claims about its record in this area. In a 19 May Business Standard interview, the roads and shipping minister Nitin Gadkari claimed that road construction had been “going on at a pace of two km/day” and “Today, it is 12 km/day.” His observant interviewers pointed out that his ministry’s own figures showed that the pace of road construction in 2013-14, before the Bharatiya Janata Party (BJP) came to power, had been 11.7 km/day, and was mostly unchanged at 12.1 km/day in 2014-15 under the BJP.

These numbers relate to a variety of highway projects. But if you look specifically at national highways, which are the focus of private sector interest and for which data is more freely available, the numbers look even more dismal for the government:Screen Shot 2015-05-20 at 12.19.18 am

The pace of highway construction under the auspices of the National Highway Authority of India is the lowest in 2014-15, the first year of the Modi government. It would be perfectly reasonable for the government to argue that its policies will take time to deliver results on the ground, and that the current slowness in highway building is a legacy of decisions taken by the previous government. But that’s not what the government is saying: it is instead making false claims about its record that do not stand up to the most basic scrutiny. Do pass the chillum, Mr Gadkari.

Arun Jaitley’s imaginary outflows

Finance Minister Arun Jaitley claimed credit, at the Vibrant Gujarat summit in Gandhinagar on 12 January 2015, for having halted “the reverse journey of investment leaving our shores and going outside” that he said had been occurred over the past 3-4 years.

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While such rhetoric may be understandable in the battle for public opinion, in terms of economic content it ranks right up there with Prime Minister Narendra Modi’s “empty coffers” claim last year i.e. it’s complete fiction.

The beauty of a vague statement such as Jaitley’s is that it’s possible to interpret it in myriad ways. So let’s go through various possibilities.

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The chart above shows quite clearly that capital flows to India have been strong in recent years, peaking at US$92 billion in 2012-13 from a low of US$8 billion during the global financial crisis. So obviously Jaitley couldn’t have been referring to overall capital flows (which include foreign direct investment (FDI), portfolio flows and loans to Indian companies).

Perhaps he meant FDI in particular which is the most relevant to those attending the Vibrant Gujarat summit. After all, we have all been told about how Indian businesses voted with their wallets against the United Progressive Alliance (UPA) and chose to invest outside India rather than at home. (Funny how outward FDI was a sign of increasing Indian confidence in 2008, but one of Indian despair in 2013.)

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Sadly for Jaitley, the data do not support this hypothesis either. Overall FDI flows have indeed dropped to the US$27-33 billion range per year after peaking at US$42 billion in 2008-09, but that is not even close to a “reverse flow of capital”.

Perhaps he meant outward FDI by Indian businesses fleeing their troubled motherland? Unfortunately, the evidence doesn’t agree with this hypothesis either: outward Indian FDI has been anaemic for the last 2-3 years in both absolute and percentage terms.

But surely India would have attracted stronger inflows were it not for the UPA’s terrible policies? While this is a reasonable question, note that we are now in the realm of counterfactuals, and quite far from any claims about “reverse flows”.

The short answer? The chart above displaying FDI flows to India closely tracks the one below that shows global FDI flows. Those flows peaked in 2007 and 2008, and had a bump around 2011 before flattening. It would seem that domestic factors had little to do with the volume of FDI entering India.

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Jaitley 0 Data 1.

Road construction has slowed, not accelerated, under Narendra Modi

In a 9 December press release, Crisil Research found that highway projects awarded in the fiscal year 2013-14 are showing “a sharp pick-up in execution amid a pro-active government and faster approvals by implementing agencies”.

While this may be true of those 16 projects, it has yet to translate into an acceleration in the road building programme of the National Highway Authority of India (NHAI). The data show that highway construction has slowed in the 2014-15 fiscal year beginning in April 2014, and been particularly slow since the Prime Minister Narendra Modi took office in May 2014.

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Between April and October 2014, 705 km of highways were completed, down 23% from the same period in the previous year. This translates into a daily rate of 3.3 km, down from 4.3 km the previous year. If we look at the period in which the Modi government has been in power for which data are available (June-October 2014), the daily rate is 3 km per day, 40% lower than what the United Progressive Alliance (UPA) recorded between April 2013 and May 2014.

What about the implementation of incomplete highway projects? One of the complaints against the UPA was that road projects that had been awarded were failing to get off the ground because of red tape and financial difficulties.

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The chart above shows that the number of highway projects under actual implementation has fallen since March 2012 and remained low. In fact, since the Modi government was sworn in the number of road projects where work is underway has dropped a tad from 3,254 (in May 2014) to 3,213 (in October 2014), while the number of projects in which work is waiting to start has gone up from 9,442 to 9,984.

The following chart shows this in percentage terms.

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To be fair, it is too early to judge the Modi government’s infrastructure building record. Land acquisition remains challenging, bank loans are still expensive and infrastructure developers have a lot of debt to pay off before they are able to invest afresh. Some will no doubt argue that many of these problems are inherited.

But for now let’s go with Arun Shourie: “When all is said and done, more is said than done”.