India to approve industrial corridor

India will add about 150 million workers over the next 10 years.

The Indian government this week is set to approve the long-proposed US$90 billion (Dh330.57bn) Delhi-Mumbai industrial corridor - an ambitious infrastructure project on the long stretch connecting two of India's fastest-growing cities.

Conceived five years ago, the corridor will be comprised of seven new cities, nine industrial parks, three ports, six airports and a 1,483km high-speed rail and road line will be developed as a trading hub.

The project, spanning six states, will create a "business model out of urbanisation", India's department of industrial policy and promotion says.

It is expected to breathe new life into the country's flailing industrial sector, which fell to a 20-month low last month to 53.6 from 55.3 in June, according to the HSBC Market Business Activity Index.

The government owns a 49 per cent stake in the Delhi-Mumbai corridor project, while Infrastructure Leasing and Financial services owns 41 per cent, and Infrastructure Development Finance Company owns 10 per cent.

The project, observers say, underscores the boom in India's infrastructure sector, currently expanding at a frenetic pace. India suffers from an "infrastructure deficit", says Kamal Nath, the urban development minister. The government is aggressively pursuing multibillion-dollar investments to overhaul the country's crumbling ports, choked airports, and pothole-ridden roads straining economic growth - shaving between 1 and 2 per cent from India's GDP.

In June, Manmohan Singh, the prime minister, approved a new draft policy to create dedicated mass manufacturing and investment zones equipped with world-class infrastructure.

The policy is geared towards raising the share of manufacturing in the country's GDP to 25 per cent from the current share of 15 per cent. The policy, if it takes off, is expected to generate 100 million jobs in the manufacturing sector by 2025.

At present, the services sector is the main driver of India's economic resurgence - accounting for 55 per cent of the GDP, and only for 25 per cent of the jobs.

Analysts say India needs not just software parks but also a large number of factory floors - like its Asian rival China - to absorb the millions entering its workforce each year.

India will add about 150 million workers over the next 10 years, says Sonal Varma, an economist with Nomura Financial advisory and securities.

"The employment elasticity offered by the services sector is not substantial enough to absorb them," she says. "India relies heavily on the manufacturing sector to absorb them."

"If the manufacturing sector doesn't take off, it is hard to see India sustaining a growth rate of 9 or 10 per cent," says Jahangir Aziz, the chief India economist at the investment bank JPMorgan.

But about 70 per cent of industrial projects in India are in limbo because of land disputes with farmers, according to a report titled "India Infrastructure - Paving the Way for India's growth", released jointly last year by Ernst & Young and the Federation of Indian Chambers of Commerce and Industry.

"Every company I talk to tells me land titles and land records present some of the thorniest problems they face as they contemplate investing here in India," Jose Fernandez, the US assistant secretary of state for economic, energy and business affairs, told the Indo-American Chamber of Commerce in March.