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India The Next Evolution [PM Network]
[September 15, 2014]

India The Next Evolution [PM Network]


(PM Network Via Acquire Media NewsEdge) No longer the dazzling supernova of the global economic scene, India looks to reinvent itself with aggressive reforms and a slate of new projects.

For a long time, it looked like nothing could get in the way of India's super-charged economy.

Spurred by a healthy private sector, India experienced record GDP growth over the past decade, soaring as high as 10 percent in 2010, second only to China among the world's largest economies. At the same time, India's poverty rate plummeted from 45 percent in 1994 to 22 percent in 2012, according to McKinsey.



But India's mighty "tiger" economy has stumbled.

Last year, the country's economic growth dropped to a decade low of 4.5 percent, with the rupee falling 13 percent against the U.S. dollar. India still ranks as Asia's third-largest economy, but this year's overall economic growth is expected to reach 5 percent, with an inflation rate hovering at 8 percent.


India has slid into "a profound slump," says Russell Green, PhD, Clayton Fellow in International Economics, James A. Baker III Institute for Public Policy, Rice University, Houston, Texas, USA. "It has been hit by the global slowdown that has impacted many other emerging market countries, but the main driver has been a nearly full stop of domestic investment activity, by both the government and private sector." The easiest place to spot the slowdown is in infrastructure. As far back as 2009, Goldman Sachs estimated India needed to invest US$1.7 trillion over the following 10 years. But US$110 billion in infrastructure projects has been stalled because of India's infamous bureaucracy, according to a March 2013 report by a consortium of state-run banks. One of the high-profile projects in limbo is the US$1.5 billion Mumbai Trans Harbor Link, which would have been the country's longest sea bridge.

"[India] has been hit by the global slowdown that has impacted many other emerging market countries, but the main driver has been a nearly full stop of domestic investment activity, by both the government and private sector/' -Russell Green, PhD, Rice University, Houston, Texas, USA "Since 2009, the number of stalled projects has been rising," says Sunil Kumar Sinha, PhD, principal economist and director, public finance, India Ratings & Research, New Delhi, India. Dr. Sinha says six sectors-electricity, roads, telecom, steel, real estate and mining-account for about 80 percent of all stalled projects.

"Any project that requires government approval, especially for land use, faces long delays," Dr. Green adds.

In many cases, that has translated to a lack of investor confidence, which leads to palpable consequences for Indian infrastructure projects-and the economy as a whole.

A TURNAROUND AHEAD? The government isn't oblivious to the issues and even started waiving approval requirements for certain levels of foreign direct investment, which fell from US$36.5 billion in 2011 to US$24 billion in 2012. To help stanch the economic bleeding and spur consumer spending, the government has also cut taxes on transportation, technology and capital goods.

"The outlook for the Indian economy is now looking significantly better than it did in mid2013," says Dr. Sinha.

With the landslide election of Prime Minister Narendra Modi and his Bharatiya Janata Party in May, some economists revised their forecasts for US$110 billion in infrastructure projects has been stalled because of India's bureaucracy, according to a 2013 report by a consortium of state-run banks.

growth upward, citing the new leader's plans for major infrastructure projects.

But beyond changes in political leadership, a profound demographic shift could also help improve India's economic outlook. By 2025, the country's middle class is expected to almost double to 583 million-which would make India the world's fifth-largest consumer market. By 2030, India is expected to account for 23 percent of the projected US$55.7 trillion in global middle-class consumer spending.

"A growing middle class means the need for high-quality project execution is expanding across the entire breadth and width of the country," Dr. Green says.

This burgeoning population will lead to a rapid project proliferation in sectors such as telecom, healthcare, transportation, IT, sustainable energy and urban development. "All of these sectors have huge growth potential," Dr. Sinha says.

The expanding middle class will bring with it not only a greater demand for projects but also a greater supply of talent to execute them, Dr. Green says. "A more educated, sophisticated middle class fills the gap between C-level decision makers and laborers," he says. "Filling those roles with competent staff can dramatically improve project outcomes." URBANJUGGERNAUTS As India sees a spike in population, its cities will have to increase their capacity. By 2025, the country is expected to have 13 urban centers with more than 10 million residents. India can't just improve its existing cities; it must also build new ones. The late academic C.K. Prahalad called for the construction of 500 new cities to house 700 million more people by 2050.

As part of that urban buildup, the government launched a program in 2012 to create two smart cities in each of India's 28 states, with 24 slated for completion by 2040. Using technology and networked information, the goal is to cut costs and coordinate basic infrastructure.

For the first phase, seven smart cities-each home to up to 2 million people-will be built along an industrial corridor that spans six states. With a budget of US$100 billion, it will be the largest infrastructure program in India's history. The sponsor, the Delhi-Mumbai Industrial Corridor Development Corp., which comprises government and private entities, aims to complete the first phase by 2019. To meet that deadline, program leaders must work closely with individual states to secure land and permits and meet regulation standards. They must also communicate the program's strategic objectivecreating a dense network of cities knitted together by public transportation-to Indian urban planners accustomed to decentralized sprawl.

It's but one change that India must make to regain its footing in the global marketplace. Here's a look inside five sectors that could play a pivotal role in the fate of India-as well as for any organization looking for fresh project opportunities.

"A growing middle class means the need for hijgh-cjualityproject execution is expandinjg across the entire breadth and width of the country." -Russell Green, PhD "The outlook for the Indian economy is now looking significantly better than it did in mid-2013." -Sunil Kumar Sinha, PhD, india Ratings & Research, New Delhi, India Telecom With more than 900 million mobile phone subscriptions, India ranks as the second-largest telecom market in the world, trailing only China. Though a controversy involving the government's allocation of 2G licenses prompted some telecoms to cut spending or exit the Indian market altogether, the sector rebounded last year when foreign investors were permitted to have a 100 percent stake in the market. This increased competition has spurred a flurry of projects focused on improving subscriber quality.

But to accommodate this project surge, the sector will need to invest in training and retaining technical talent. "Staffing remains a real challenge with India's largely young and inexperienced workforce," Dr. Green says.

PROJECT SPOTLIGHTS Call it telecom 2.0, as nearly every major player launches an upgrade project. India-based Uninor this year started a INR6 billion project to improve its coverage, while India's largest provider, Bharti Airtel, will undertake a INR40 billion initiative in the northwestern state of Punjab.

The five-year initiative includes laying 10,000 kilometers (6,214 miles) of fiberoptic cable. And the Indian government has a INR200 billion telecom project in the works with an even bigger scope: provide high-quality broadband access to all villages by 2020.

As part of the overarching modernization trend, Nokia is working on a project this year to replace old equipment, which will help to reduce operational costs for customers and provide compatibility with the most current technology. And the team has to do it all without disrupting anyone.

"The major challenge we have is working on a live network with no disturbance to the services for the end users and zero revenue loss for our customer," says Manoj Sharma, PMP, zonal project manager, Nokia Solutions and Networks, Gurgaon, India.

To get the job done, the team had to thoroughly test the upgrade processes before they could go live. It also had to secure and train skilled team members-capable technicians both familiar with the new technology and resourceful when it came to compatibility issues, Mr. Sharma says.

"The major challenge we have is working on a live network with no disturbance to the services for m end users and zero revenue loss for our customer." -Manoj Sharma, PMP, Nokia Solutions and Networks, Gurgaon, India Transportation Covering 3.3 million square kilometers {1.3 million square miles), India clearly needs sophisticated transportation networks to keep its economy moving.

While the nation is already home to the world's fourth-largest rail network, high-speed and semihigh-speed rail service, especially for highly trafficked national corridors, is a top priority in India's US$4.8 billion transportation budget this year. Rail projects in India look to improve speeds, introduce new and sleeker trains, and maintain and upgrade the signaling network.

Road and airport projects are also seeing an uptick in activity, though red tape has put many behind schedule.

PROJECT SPOTLIGHTS Telecom isn't the only sector with upgrade as the watchword. Transportation teams across the country are also launching major renovation efforts-but India's legendary bureaucracy is rearing its ugly head once again.

Ansaldo STS, for example, is part of a threecompany consortium hired by Indian Railways to modernize the signaling system on its 400-kilometer (249-mile) route from Ghaziabad to Kanpur. Yet while Indian Railways approved the project plan in 2005, work didn't gather pace until almost five years later. At that point, the technology specified in the project plan had changed, and the new technology needed testing and approval from governmental agencies.

The project's technology has been both "a crucial component of project planning as well as one of the big challenges," says Sanjeet Teri, PMP, senior project controller, Ansaldo, Noida, India.

The team has also faced significant scheduling obstacles. Work can only be done on the rail during twoto three-hour periods when there's no activity on the line. These brief work windows ultimately have led to pushing back the completion date.

Along with its train routes, India's congested and hazardous roads are getting revamped. To relieve congestion in India's largest city, Mumbai officials embarked on a INR30 billion monorail project in 2008. Challenges involving the country's lack of experience with monorails, land acquisition and environmental regulations have delayed the project long past its scheduled 2011 completion. A 9-kilometer (6-mile) section opened in February, with the final section, about 11 kilometers (7 miles) long, slated to open next year.

Improvements haven't been isolated to land travel: Last year, the Netaji Subhas Chandra Bose International Airport in Kolkata opened a INR23 billion new terminal, expanding its annual capacity from 4.8 million to 25 million passengers. Still, Indian airports lag behind others in Asia, so the country intends to construct 200 more facilities in smaller cities over the next 20 years. A major new airport near Mumbai as well as modernization projects for airports in Chennai, Lucknow, Ahmedabad, Guwahati and Jaipur have been proposed, too.

Indian airports lag behind others in Asia, so the country intends to construct 200 more facilities in smaller cities over the next 20 years.

Solar Energy India is facing an energy crisis. During peak hours, the country's power providers supply about 11 percent less energy than it needs, according to a 2013 Deloitte report. Making matters worse, India's coal, which is projected to provide two-thirds of the country's energy through 2022, is expected to run out in the next 45 years. To meet consumer and manufacturing needs, project leaders have sought alternatives, especially in solar. The subcontinent has 250 to 300 days of sun a year-producing a potential 700 billion megawatts (MW) annually.

PROJECT SPOTLIGHTS The outlook for India's solar sector is sunny, but there are a few clouds on the horizon.

In January, a consortium of public utility companies announced plans to build what's billed as the world's largest solar plant in Rajasthan. The multiphase project-with the first budgeted at INR75 billion-should be completed by 2022, when the 4,000 MW plant will produce 6.4 billion kilowatt hours annually and reduce India's carbon footprint by more than 4 million metric tons per year. But first the project team will have to clear hurdles associated with land permits. Environmental officials have expressed concern that the proposed plant layout could encroach on protected wetlands.

As part of an effort to harness photovoltaic power, India's government created the Jawaharlal Nehru National Solar Mission in 2010. The initiative provides funding to solar projects with a maximum capacity of 750 MW and aims to provide 20,000 MW of grid-connected solar power by 2022. Despite the bright outlook, solar will contribute less than 1 percent of the total energy produced in India through 2017.

With governmental incentives, however, come governmental restrictions. The second phase of the Jawaharlal Nehru Mission specifies that half of all solar projects must be domestically manufactured, which has led to high solar cell prices. In April, U.S. company SunEdison walked away from a proposed 20 MW project in Gujarat, citing the cost of manufactured components.

The subcontinent has 250 to 300 days of sun a yearproducing a potential 700 billion megawatts annually.

IT Home to global tech giants such as Infosys and Wipro, India has emerged as an IT force to be reckoned with. Although it hasn't been entirely immune to the country's sluggish economy, the industry roared back last year, with IT spending expected to rise nearly 6 percent in 2014.

Valued at US$108 billion in 2013, India's IT sector is projected to nearly triple by 2020. Cloud services are expected to fuel part of that growth. Now worth US$600 million, they're anticipated to hit US$1.3 billion by 2017.

PROJECT SPOTLIGHT The Indian government must communicate with a population speaking nearly 800 languages. To facilitate this labyrinthine process, the Department of Electronics and Information Technology launched a digital portal project last year that will make government services, both at the state and national levels, more accessible to citizens across the divides of language and culture. The portal, known as the eGov AppStore, will deliver cloudbased applications that can be customized by government agencies ranging from libraries to the food and drug administration.

"This initiative will accelerate the delivery of e-services in the country while optimizing the government's spending on information and communications technology," says Renu Budhiraja, senior director of e-governance, the Department of Electronics and IT, Ministry of Communications and IT, New Delhi, India. "This will not only ensure optimum utilization of the infrastructure and speed up the development and deployment of e-governance applications but help avoid duplication of effort and cost, and promote certified applications following common standards." In eight months last year, the project team went from crafting a strategic vision to building the online app store. One of the biggest challenges has been "creating applications that are secure and able to run a multitenant environment serving multiple clients with a single instance," she says.

The Indian government ultimately expects the project to drive down tech costs. The state of Maharashtra, for example, has cited the technology as helping to connect hundreds of local stamp duty collection offices, cutting costs and improving workflow.

"[The eGov AppStore] will accelerate the delivery of e-services in the country while optimizing the government's spending on information and communications technology." -Renu Budhiraja, Ministry of Communications and IT, New Delhi, India Healthcare " Spending on healthcare in India remains drastically low-about 4 percent of the GDP. But a growing middle class as well as a booming medical tourism trade could mean a push for premium services. Spending on private healthcare in India is slated to jump by almost 10 percent per year and account for 13 percent of Indian household consumption by 2025-surpassing levels in Brazil, China and Germany. In response, healthcare providers are projected to spend more than US$1 billion on IT in 2014, a 4-percent increase from 2013.

PROJECT SPOTLIGHTS Aster DM Healthcare, a healthcare conglomerate building a presence across India, has launched Aster Medcity, a US$300 million hospital project in the state of Kerala. By the end of 2010, the land for the hospital, which will be more than 3.2 million square feet (927,300 square meters), had been acquired.

For project manager Abey Mathew, PMP, one of the biggest challenges-and successes-has involved schedule compression. The project's start date had to be delayed because of legal approvals, but the target completion date was not moved. "The design phase overlapped with the construction phase, which was complicated but also cut down on our overall timeline significantly," he says.

Because the developer wanted to achieve a LEED gold rating, local environmental considerations played a large role in the project plan and design. A master project document incorporated input from team members while keeping them all informed of any changes to the hospital's design, which were made after input from medical experts. With stakeholders based in different parts of the world, including corporate headquarters in Dubai and an architecture team in the United States, Mr. Mathew had to manage a steady diet of conference calls and status documents to keep the team on track. The team held several workshops to test different design concepts, which helped ensure that significant changes wouldn't be suggested during construction. The team successfully commissioned the hospital in February.

While Kerala is a hub for medical tourism in India, organizations are looking to other cities as well. Manipal Health Enterprises, for example, is investing INRI billion in projects to increase medical tourism in Rajasthan, India's largest state.

Spending on private healthcare in India is slated to jump by almost 10 percent per year and account for 13 percent of Indian household consumption by 2025.

Across the Subcontinent: 7 Ambitious Projectst WELSPUN SOLAR MP PROJECT Location: Neemuch, Madhya Pradesh Budget: INR11 billion Schedule: May 2012-February 2014 Project: The 130-megawatt project is the largest solar power plant in India. It's also Welspun Energy's second large-scale photovoltaic plant to be completed on or ahead of schedule in a project landscape mired in delays and setbacks. Company execs pointed to the early acquisition of land and rights of way as central to the project's success.

GULBARGA REGIONAL AIRPORT Location: Gulbarga, Karnataka Budget: INR1.86 billion Schedule: Launched in 2008, no confirmed completion date Project: Developed through a public-private partnership with the government of Karnataka, the airport project-the first in this region-was initially scheduled to be operational in May 2012, but legal action between partners in the joint venture company behind the project halted construction with 75 percent of the 1,900-meter-long (6,234foot) runway complete. In April 2014, however, Karnataka's infrastructure minister said the parties had reached a resolution and Gulbarga's airport would proceed to completion "soon." After completion, the joint venture company, Regional Airport-Holdings International Ltd., hopes to develop the surrounding land; an international aviation university has been proposed for the site.

CHENAB BRIDGE Location: Reasi, Jammu and Kashmir Budget: INR5.13 billion Schedule: 2003-2016 Project: Expected to rise 359 meters (1,178 feet) above the Chenab River, the Chenab Bridge-part of a larger rail project to connect Jammu and Kashmir to the rest of India-will be the world's highest rail bridge. Concerns about seismic and terrorist activity halted construction in 2008, but to get the project back on track, team members redesigned the bridge to ensure it can function even if a supporting column is lost.

INDIA POST IT MODERNIZATION PROJECT Location: Nationwide (155,000 post office locations) Budget: INR49 billion Schedule: 2012-2015 Project: The Department of Posts has taken on the herculean task of overhauling the country's entire postal system. The project includes implementing new financial services technology, computerizing all post offices and deploying new handheld devices so postmen can deliver banking products directly to consumers anywhere. Bangalore-based IT giant Infosys won the INR7 billion contract to develop software for the new mobile service.

DISCOVERY IQ Location: Bangalore, Karnataka Budget: US$15 million Schedule: 2011-March 2014 Project: The Discovery IQ molecular imaging system designed Healthcare (part of U.S.-based General Electric Co.) was aimed at providing healthcare providers with the ability to diagnose cancer earlier. The three-year system development project required close collaboration between Indian nuclear medicine physicians and oncologists.

PUNJAB BROADBAND SERVICE EXTENSION Location: Punjab (statewide) Budget: INR40 billion Schedule: 2013-2018 Project: Bharti Airtel's plan to lay 10,000 kilometers (6,214 miles) of fiberoptic cables and extend its 4G LTE network throughout Punjab is the first attempt in India to establish high-speed coverage across an entire stateincluding rural areas traditionally seen as not economically viable.

EASTERN FREEWAY Location: Mumbai, Maharashtra Budget: INR12.5 billion Schedule: 2008May 2014 Project: The nearly 17-kilometer (10.5-mile) road offers a direct route downtown from Mumbai's suburbs. Mumbai Metropolitan Region Development Authority project managers saw delays throughout the course of the project, due to problems related to property acquisition and relocating more than S.000 structures.

(c) 2014 Project Management Institute

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