Global Economics

Finally, a Modern Passage to India


On July 14 passengers on international flights to and from New Delhi will no longer walk through the overcrowded building that has been the capital's gateway to the world for 24 years. Instead, they will enter a terminal designed by London architects HOK International that is encased in sheets of glass etched with images of Indian dancers. With 78 gates, 97 automated walkways, 95 immigration counters, 215,000 square feet of retail space, and parking for 4,300 cars, the building is comparable to the modern aviation hubs of Hong Kong, Singapore, and Dubai. "For the first time, we will have a world-class hub," says Binit Somaia, Sydney-based director for South Asia at the Centre for Asia Pacific Aviation (CAPA).

The terminal, which with other renovations cost $2.2 billion, is a sign that India may be turning the corner on solving one of its most intractable problems: a notoriously poor infrastructure. The terminal took only 37 months to build. That's faster than the 45 months China spent to complete the terminal in Beijing that opened in time for the 2008 Olympics. By creating a new benchmark for completing major projects, "the Delhi airport is going to transform India," says T.V. Mohandas Pai, head of human resources at Infosys (INFY).

India spends 6.5 percent of its gross domestic product on infrastructure, vs. 11 percent in China, according to consultants Ernst & Young, and its undeveloped roads, power plants, and ports have limited growth. The average turnaround time for ships unloading and loading cargo at India's major ports is 3.8 days; in Hong Kong it's 10 hours. The delays at airports have an impact, too. When trying to persuade companies to put money into India, "You don't want foreign investors to get stuck behind immigration lines for two and a half hours," says Jahangir Aziz, India chief economist at JPMorgan Chase (JPM). New Delhi's old airport definitely has affected the economy, says Rahul Bajoria, an economist in Singapore with Barclays Capital (BCS). "Beijing and Shanghai have fabulous airports, and they are much more linked to the global economy than Delhi is," he says.

The government of Prime Minister Manmohan Singh has focused airport projects on the cities investors are most likely to visit. New airports already are operating in Bangalore and Hyderabad, the hubs for India's IT and pharma industries. Passengers can now fly easily from Bangalore to Singapore; before, they often had to waste hours connecting through Chennai. "Foreign companies can come to Bangalore on shorter notice now," says Manan Bhatt, senior vice-president for external relations at Avesthagen, a Bangalore biotech. "The improved connectivity is a very attractive proposition." Due next for an upgrade is Mumbai, the financial capital, which will get a new terminal in 2012.

The price tag to expand and upgrade Indian airports by 2020 is likely to be $20 billion, says CAPA. With the government estimating that more than $1 trillion must be spent on ports, roads, utilities, and other infrastructure, Singh and his ministers are cooperating with private companies for funding and knowhow. The Delhi terminal was built by a private-public consortium overseen by builder GMR Group. Last year a special cabinet panel headed by Singh was set up to accelerate infrastructure investments.

Still, bureaucracy remains a problem. Of the 618 big infrastructure projects monitored by the government, 323 were behind schedule as of Mar. 1, some by as long as 60 months. That has led to $12.3 billion in cost overruns.

Fraport is a German company that operates Frankfurt Airport, one of the world's busiest. Its Indian business, which includes a stake in the consortium managing the Delhi terminal, hopes to operate other airports the government promises to privatize. "None of those projects has materialized," says Ansgar Sickert, head of Fraport in India. "We are not clear where the opportunities really lie in India." More projects like Delhi may clarify things.

The bottom line: India's government has made big strides in infrastructure with its new airports. Red tape, however, needs cutting fast.

Sharma is a reporter for Bloomberg News.
Nair is a reporter for Bloomberg News.

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