India Infrastructure Report 2004 - Ensuring Value for Money (Chapter 1)

The paper discusses and summarises the principal findings of the various articles in the report. It also develops the theme of ensuring value for government expenditures through inter alia PPPs and PFIs. Government expenditures on vital social services with vast positive external effects need to be stepped up, but doing this the old way would be wasteful and pointless even if they have some positive demand-side effects. Among the innumerable experimentation and experiences of non-governmental delivery of social and public services all over the country, there are many worthwhile and proven (social) inventions which need to be scaled up. PFIs inter alia have the potential to address the problem. Vast gains are possible not only in efficiency. In the Indian system, the gains arising out of better allocation including better and efficient supply that can be built into the frameworks for PFIs and PPPs, can be enormous. The poor have too long been used as an excuse to create rents and to result in system and organizational failure. That stands exposed since denial in the most public and basic of services is large despite the intentions to the contrary and the vast sums being lost in rents, inefficiency, and misdirection. The new paradigm of mobilizing the private sector and society, in competition and in collaboration with the state can set in motion the processes for the state itself to change and improve its efficiency. The macroeconomic environment for such change is also conducive today. In some sectors like road building and management, the change has begun as increased role of the private sector takes root. The challenges faced by the DFIs are many as the financial sector reform progresses. While some, especially those with a large exposure to the manufacturing sector, would have to become ordinary financial intermediaries, others could continue to play a developmental role that is very different from the sectoral sanction of concessional finance of the past. Upon them falls the challenge of leverage funds, credit support, residual risk taking, project structuring, and framework development for better regulation and sectoral markets, besides financial markets development