India is the “rowdiest” democracy in the world, says Atul Punj, chairman of engineering and construction services firm Punj Lloyd. According to Punj, investing in rural infrastructure needs to be the country’s top priority, because that’s where most of India’s people live. Doing so will facilitate everything from getting children to schools and taking farmers’ perishable produce to market. India can craft a model within its “own madness,” Punj says in an interview with India Knowledge at Wharton during the 2010 Wharton India Economic Forum.

An edited transcript of the conversation follows.

India Knowledge at Wharton: Infrastructure is often cited as a problem in India and many of the high profile infrastructure issues like airports and roads in urban areas are often talked about. What would you say is one of the most important infrastructure stories that is not being talked about enough?

Atul Punj: Well, one of the most important stories has been the development of rural infrastructure in India. In India, unlike China, we addressed it from the rural level first and have now moved to the urban level and in between urban centers. The development at the rural level is all about connectivity. If you don’t have a road — sorry, a rural road — you can’t get to a school. You can’t get to a hospital. You can’t get your produce to market. So the government for the past 10 years has been dealing with a lot of those issues at the bottom of the pyramid. We are now seeing traction happening at the top of it.

India Knowledge at Wharton: What would you say is the greatest impact of that lack of infrastructure in rural India? Which sectors suffer the most?

Punj: Well, agriculture. Seventy percent of India’s population is still directly involved with agriculture. When you have 40% of perishables being lost because they cannot be taken to the market or the lack of a cold chain because of the lack of connectivity, that sector has really been hammered consistently. The recognition that we need to fix that has now gained a lot of currency in India, so we are going to start seeing some significant traction over there.

India Knowledge at Wharton: What do you think will change?

Punj: What will change is the ability for children to go to school [faster] rather than in some cases walking 10 km (6.2 miles) a day. Or getting [sooner] to a hospital for medical attention. You will start seeing a lot of economic activity taking place at the rural level rather than pure migration to the urban centers, which has its own problems. We are going to start seeing a significantly different India in four years.

India Knowledge at Wharton: What do you think needs to happen for these improvements to take place? Are significant policy changes needed?

Punj: Policies are all in place. It is the implementation in which we are lacking. It is the ability or the governance issue that needs attention. It is the systems that allow these programs to get rolled out that need attention. There is a lot of attention now being given because the electorate has become very smart. They are reelecting representatives who have delivered on their promises rather than voting purely on caste or religion lines as it used to be in the past.

You are seeing a significant shift in the way the rural resident is addressing his political mandate. And that is resulting in a lot of emphasis on delivery. And I think you are going to see a significant change now.

India Knowledge at Wharton: Punj Lloyd has operations in 16 countries, including Singapore, Thailand and China. What lessons can be learned from some of these countries in infrastructure development? You said that India has developed in a way that was opposite to how China had. What can India learn from these countries?

Punj: Not very much, because the Indian model is the Indian model. India has its own genius. It has its own madness. It is the rowdiest democracy in the world. It is the largest democracy in the world. It is many countries within a country. It is many societies within a society, many economic sections within that society. The fact that India is a democracy is what sets it apart from China. China is a command-and-control economy where the president or the prime minister or the ruling elite issues a command. And it will get done. In India the debate starts after an instruction is given. It is just the nature of the Indian.

Also, what happens is that very often we miss successive generations of technology. So when we finally adopt it and decide to reform a particular sector, we go for the best in class. A case in point: our telecom density was extremely low. They opened it up for private sector participation and today our teledensity is one of the highest in the world. The growth — they are adding almost 100 million subscribers a year — is more [subscribers] than most countries have. Until 1982 we had two television stations beaming black and white television, basically agrarian-based programs. We had the Asian Games in 1982. The whole country got blanketed with color television.

Similarly with highways. One of the biggest risks in financing a highway project is traffic. The fact that India is willing to catch up is not an issue. So the financing of some of these projects has now become easier than a lot of other countries have found. So when you go to somebody and you say that you want to finance a $1 billion highway project, you already have the data because it’s not a new alignment. It is an existing two-lane being converted to an eight-lane highway. You already know how much traffic of what category is traveling on that part. So India is unique. I don’t think we can really learn a lesson from any other country because it is not like any other country.

India Knowledge at Wharton: Reaching back into its own past, what can India learn rather quickly to catch up? What mistakes does it need to avoid?

Punj: What we need really do is make the bureaucracy at the lower levels much more efficient. It is a systemic fix that we need. There are too many layers, too many interested parties. In Delhi itself, for example, you have three sets of government. You have the lieutenant governor who controls the police and the Delhi Development Authority. You have the mayor who controls the Municipal Corporation of Delhi and you have a chief minister who controls the rest. So who is really in charge? And that’s true for almost every city in India. So a lot of that needs to be fixed.

India Knowledge at Wharton: That filters down into rural areas as well?

Punj: It is now beginning to because the focus of the government is on inclusive growth. The focus is not on the few people that make the Forbes billionaires list every year and the few new ones that come on. The focus is on how you make sure that the economic activity really percolates down to the lowest possible level. Every speech by the prime minister talks about this. He has made corporate India very responsible to avoid conspicuous consumption, and see what they can do in terms of CSR [corporate social responsibility].

India Knowledge at Wharton: If you had to prioritize infrastructure development in rural areas, what is the most critical?

Punj: I would say water, because 70% of hospital beds in India are filled with people suffering from water-borne diseases alone. And the Indian support system for an individual is his family and the village. So when you have somebody transported from a village to a class B town or a class A town, he will typically be accompanied by at least five to six people. So you have now seven to eight people being taken out of economic activity because of that one individual. So it is a positive and it is a negative. But that is the most significant fix we need.

India Knowledge at Wharton: What would be at the top of the agenda for urban areas?

Punj: Land is the big issue. I had a friend visiting from overseas sitting in the front seat of the car with a video camera. I asked him what he was doing. He said if he ever tried to describe the traffic to anybody back home they would never understand it. “So I’m just going to play it back for them.” We need to have the kind of focus that New Delhi is getting in every city. That is the biggest challenge.

India Knowledge at Wharton: Beyond improving roads or increasing their sizes, are there significant plans for development of public transportation?

Punj: Yes. New Delhi, for example, has been [expanding] its metro system. It has grown at record speed. By 2018 we will have 450 kilometers of track compared to London’s 408. London has taken over 100 years to build [its tracks]. We will do it in 12. Based on that, Hyderabad, Chennai, Mumbai, Kolkata and a few other cities are all rolling out their mass transport systems.

India Knowledge at Wharton: What area is your company focusing on the most in terms of development?

Punj: We focus across the board. We focus on urban infrastructure. We focus on oil and gas. We focus on petrochemicals. We do a lot of offshore work in terms of pipelines, platforms, fabrication and erection. We do a lot of work in the renewable [energy] space. We have just commissioned the world’s largest wheat-to-ethanol plant in the U.K. We have a large solar initiative that is panning out now. And, of course, in the nuclear space, we are playing a significant role.

India Knowledge at Wharton: An environment like India that is unique and has lots of bureaucratic hang-ups sometimes gives rise to a lot of innovation. Have you seen examples that have really struck you as innovative in developing certain kinds of infrastructure?

Punj: The whole country is [innovative]. Economists [have outlined] what India must have in terms of power, roads and airports to achieve 6% [GDP] growth. India has got none of that. We are now talking about it. We have been growing at over 8% without any of that. [India’s] entrepreneurs are so innovative that they have found their solutions. You had somebody talking about being a vendor for BMW for their gearboxes. They are actually supplying out of India on a just-in-time environment. But they cannot predict when the next ship is going to come and how soon their goods are going to actually go out. In a completely uncertain environment, they are dealing with best-in-class European or American or Japanese automotive manufacturing requirements. But they found their solution. And this will hold true for any number of industries in India. So the innovativeness of the Indian is what sets him apart.

India Knowledge at Wharton: We just published a story on a really interesting project called Lifeline Express. What was interesting about that project was medical infrastructure piggybacking on railroad infrastructure. Are there other examples like that — where you think one form of infrastructure can be used to help expand another form?

Punj: That happens in India. We are investors in what is the largest hospital project in the world. It is 1,250 beds started up in one phase. And we now partnered with Duke University as their research partners in India. We have what we call medical outreach programs. You have these fully-fitted buses that go into the villages and just spend weeks on end doing the initial screening of potential patients. You have women with gynecological problems or men with cardiac problems or diabetes, etc. Screening happens in the most rural of rural areas. So there is a lot of that that happens where you have the best-in-class in the city actually reaching out to the extreme have-nots. There’s no charge. It’s free. And doctors volunteer to go down from the hospitals.

India Knowledge at Wharton: Looking ahead five or 10 years, where do you envision India in infrastructure, given the current situation?

Punj: India will look a very different place physically over the next five years. We will see roads that will be up to international standards. We will see a lot of power generation [capacity] coming online. We will see a lot of transmission and distribution [capacity] coming online. Airports are now being commissioned. There is a world-class airport that has come up in 36 months, the second largest in the world — 78 gates [compared] to Beijing’s 18. You are seeing Mumbai under construction right now. You are seeing Chennai. You are seeing Kolkata. All have been upgraded. And you have 26 new airports that have been built. So India will look very, very different.

India Knowledge at Wharton: And rural areas as well?

Punj: Rural areas as well. I don’t think rural India will lag because — as I was explaining earlier — the politician knows he has to deliver to his constituents. His constituent is not the city. His constituent is at the village level. I was in Canada recently with one of our ministers and we were all laughing that his counterpart on the other side had a constituency of 100,000 people. The Indian minister’s constituency was 1.8 million with over 200,000 villages. So that’s the electorate he has to address. They are the people he needs to deliver to. You are going to start seeing a huge amount of pressure. There is already a huge amount of development happening at that level.