Ali Oğuz Diriöz, July 2024

Infrastructure Investments dual role as vote winners and securing supply chains ; A closer look at India

The elections in India, the world’s largest democratic elections,[1] are over. Since June, a coalition government led by the incumbent Prime Minister Modi and the BJP have secured sufficient majority for a third term. While many analysts mentioned the significantly lower than anticipated votes that the ruling BJP received. Many analysts concur that the significant infrastructure investments such as roads, railroads, airports, bridges and the like have still played a major role in attracting those majority of voters who decided to support the incumbents. Electoral populism often feature such grand projects during their electoral campaigns.

While in the second round of the French elections and with the Elections in the UK the Social Democrats were able to score big wins, on many other parts of Europe it was the far right parties that made big surprises during European elections. It remains to be seen how the populist right, far right, center and left parties would perform in the other elections around the world, especially with the upcoming elections in November in the United States (former President Trump currently being a favorite to win following the assassination attempt and President Biden’s poor debate performance). Yet infrastructure projects are more than vote-winners; they are actually useful to enhance the trade and logistics as well as supply chains and logistics capacity of the nation.

For instance, while not as immediately visible to the public, maritime port capacity expansion and modernization, building new storage and depots in addition to customs and processing centers (process capacity) were an area India quietly spent significant amount of resources to modernize. While domestic politics of India and the votes as well as the use of populist grand-infrastructure projects were undoubtedly a factor, the purpose of such projects and the more quiet port modernization were geared to enhance India’s logistic capacity. In an era of slowed global trade and economy, India’s additional maritime capacity intends to secure the supply chains and the availability of both import and export capacity. The next parts will especially analyze how such infrastructure investments have a dual purpose of securing the supply chains and logistics capacity of India.

India’s economy is booming in times of slow global growth; its projected growth rate over the next couple of years exceed 6% per annum; and is projected to be the fastest growing economy among the major economies in the World.[2] India, thus is able to attract significant investments. Although still considered as an emerging economy, it is also a major technological hub and has many major tech clusters, particularly in Southern Indian cities such as Bangalore, Hyderabad and Chennai. India, has had a relatively stable environment concerning its neighbors in recent years. Yet even more importantly, through infrastructure projects, India enjoyed a stability for alternative supply chains and logistics. Several key goods and raw materials were able to be safely and securely available for India.  Under the current era of geopolitical uncertainties and risks across the World, India was able to secure supply routes and thus was deemed as a prime destination for investment by major global tech-giant corporations. In 2023, revenue growth rates for Apple, Microsoft, and Meta in India outpaced the rate of these companies’ global expansions.[3] India’s investment in infrastructure and logistical capacity aspired further confidence to investors.

While building airports as well, the Indian government also didn’t miss their opportunities to renew and modernize maritime port facilities. In fact, this is something India has quietly done, which is indeed counter-intuitive before elections, since the voters don’t necessarily immediately visibly perceive the benefits of maritime ports, their use as vote-winners is limited. Yet, developing and modernizing maritime port capacity is a priority policy that India has been successfully doing over the last few years.[4]

Maritime routes are still the most essential mode of transporting goods, commodities and raw materials in the World. Thus, global supply chains heavily rely on maritime and port capacities. According to Gu & Liu (2024), more than 90% of all global trade still relies on maritime routes.[5] Therefore, this over-reliance on sea trade implies many vulnerabilities, which need to be overcome by developing additional port capacities and through modernizations.

Such maritime facilities and trade networks would be needed for many aspects of the economy, including the IT industry. However, more traditional sectors and commodities also rely on trade access and availability of supply. For instance, it is well known and the World Gold Council (WGC) affirmed that it in May 2024, that India is one of the world’s biggest gold markets. In May 2024, India was the world’s third biggest gold buyer, incidentally Switzerland being the top buyer.[6] While part of the gold is in the form of the Exchange-Traded Funds (EFTs), a significant portion of Indian gold is bought as physical gold; which requires reliable and secure access to safe suppliers. Despite so much demand for gold, according to the US Geological Survey, Neither India nor Switzerland are not among the top 10 gold producing countries.[7] India, especially culturally has value and use of physical golds in the famous Indian Weddings which last long, as with the lavish and world famous stars and billionaires filled celebration of Anant Ambani – Radhika Merchant wedding this summer of 2024.[8] India not being a major gold producer but a major buyer of physical gold, requires safe and secure access and availability and thus reliable supply chains to gold producers around the world, from Australia to Uzbekistan. Thus needing good logistical capacity such as modern ports, highways and railways.

Overall, channeling funds to public infrastructure investment out of electoral concerns is common across the world. Examples range from Chile[9] to the United States, and India. But such infrastructure investments, if planned and managed to address strategic and regional needs, can have the benefits of expanding the economy and benefitting citizens through better public services.[10] They would also engage various stakeholders, and if the processes are transparent and based on rules, would actually promote the accountability of both local and national governments towards their citizens. Last but not least, even the immediately less visible investments such as the modernizations of port capacity, would in the long run strategically benefit the nation by bolstering their logistical capacity, and strengthen the nations supply chains diversification and exporting capabilities.

[1] Daily Hunt: https://m.dailyhunt.in/news/india/english/anienglish-epaper-anieng/germany+congratulates+indians+on+successfully+conducting+world+s+largest+democratic+elections+-newsid-n613979658 ;

The democratic process of the Indian elections was commented as ‘hard not to be impressed’ by former Pakistani Ambassador, who praised the procedures.  Business Today: https://www.businesstoday.in/india/story/hard-not-to-be-impressed-former-pakistani-ambassador-praises-indian-elections-democracy-432327-2024-06-06

[2] Pardafas: https://english.pardafas.com/india-to-remain-fastest-growing-large-economy-in-2024-world-bank-reports/

[3] Economic Times https://economictimes.indiatimes.com/news/company/corporate-trends/india-emerged-as-the-most-preferred-market-for-tech-giants-apple-ceo-tim-cook/articleshow/109840176.cms

[4] The Economist: https://www.economist.com/asia/2024/05/09/india-has-quietly-transformed-its-ports

[5] Gu, B., & Liu, J. (2023). A systematic review of resilience in the maritime transport. International Journal of Logistics Research and Applications, 1–22. https://doi.org/10.1080/13675567.2023.2165051

[6] Business Insider https://www.businessinsider.in/india/news/india-the-third-biggest-gold-buyer-in-may-after-switzerland-and-china-wgc/articleshow/110783214.cms

[7] U.S. Geological Survey, Mineral Commodity Summaries, January 2024, pages 82-83. Prepared by Kristin N. Sheaffer. https://pubs.usgs.gov/periodicals/mcs2024/mcs2024.pdf

; Also, Referenced and summarized in a news article by Investing News  https://investingnews.com/daily/resource-investing/precious-metals-investing/gold-investing/top-gold-producing-countries/

[8] CNN https://edition.cnn.com/2024/07/12/style/anant-ambani-radhika-merchant-wedding-mumbai-intl-hnk/index.html

[9] Livert, F., Gainza, X., & Acuña, J. (2019). Paving the electoral way: Urban infrastructure, partisan politics and civic engagement. World Development, 124, 104628.

[10] Bielenberg, A., Williams, J., & Woetzel, J. (2020). Four ways governments can get the most out of their infrastructure projects. McKinsey & Company. January.