Union Budget 2024-25: Infrastructure sector receives a big boost

Sitharaman announced Rs 2.66 lakh crore for rural development, including infrastructure. The allocation for the Pradhan Mantri Awas Yojana Rural saw a 68% jump in FY25 compared to the last fiscal, and that is expected to push housing infrastructure. About 30 million houses, both in rural and urban areas, are expected to be built.

In the last few Budgets, the focus of the government has been on modernising the Indian Railways and National Highways Authority of India with a record allocation of Rs 14.7 lakh crore between FY21 and FY24. To the surprise of many industry players, the minister did not announce any new scheme or project in the highways, railways, and aviation sectors for FY25. Under the Viksit Bharat vision, the government has set a target of building 50,000 km of high-speed access control highways and introducing high-speed trains in the country.

“The government’s strong fiscal support of Rs 11 lakh crore will have a positive cascading effect on different sectors. The Rs 26,000-crore outlay for Bihar will boost roads and highways connectivity, while an allocation of Rs 2.66 lakh crore for rural development—including rural infrastructure—will give impetus to the rural economy,” said Sanjay Kumar Sinha, Founder and Managing Director, Chaitanya Projects Consultancy, an infrastructure and transportation services firm.

The Budget announced the launch of Phase 4 of Pradhan Mantri Gram Sadak Yojana to provide all-weather connectivity to 25,000 rural habitations. Land reforms are also on the cards for development in rural areas. The Budget announced plans to assign unique identification numbers for all land parcels in rural areas through ‘Bhu-Aadhaar’, and it plans to establish land registries.

Infrastructure and energy security were among the top priorities of the government. Massive infrastructure development would need private capital, and the government is looking to promote this through viability gap funding and enabling policies and regulations. A market-based financing framework will be brought out to facilitate this, the finance minister announced.

States have also been asked to provide support of a similar scale for infrastructure and a provision of Rs 1.5 lakh crore for long-term interest-free loans has been made to support the states in their resource allocation.

Keeping in mind India’s net-zero emission target by 2070, the Budget laid a road map for infrastructure for energy transition with solar, nuclear, and pump-storage hydroelectricity receiving a policy fillip. To strengthen domestic manufacturing of solar modules and their components, currently imported from China, the Budget expanded the list of exempted capital goods for use in the manufacture of solar cells and panels.

Nuclear energy is expected to form a significant part of the energy mix and the Budget stressed on research and development in the sector. The government said it will rope in the private sector for setting up compact nuclear reactors, called Bharat Small Reactors, and for research and development of Bharat Small Modular Reactor and of newer technologies for nuclear energy.

Photo by Getty Images Reports suggest the government is in talks with big players like Reliance Industries, Adani Group, Tata Power, and Vedanta to invest Rs 2.2 lakh crore in nuclear power, a non-carbon-emitting energy source that contributes less than 2% of India’s total electricity generation at present. It is the first time that the nuclear sector has been opened to private players.

“Expanding the list of exempted capital goods in manufacturing solar cells and modules will bring down the cost of domestic production and accelerate energy transition. Although nascent, steps towards exploration of public-private partnership in nuclear energy, especially development of small modular nuclear reactors, can help scale up nuclear energy capacity in the country as well, further supporting the sustainability push in the energy segment,” says Ankit Hakhu, Director at rating agency CRISIL Ratings.

Sitharaman said the PM Surya Ghar Muft Bijli Yojana has received over 12.8 million registrations and 140,000 applications. Launched earlier this year with a target of installing solar rooftops in 10 million households with a Budget outlay of Rs 75,000 crore, the scheme is expected to revolutionise the renewable energy sector.

State Infra

Projects worth Rs 74,000 crore were announced for key allies of Bihar and Andhra Pradesh. Roads, power, airport and irrigation projects worth Rs 59,000 crore in Bihar—road projects worth Rs 26,000 crore, a power plant for Rs 21,400 crore, and Rs 11,500 for flood management and irrigation—and Rs 15,000 crore for development work in Andhra Pradesh have been allocated. This also includes the development of industrial corridor nodes and religious tourism in the states.

Although the government did not grant special status to Bihar, it announced an additional allocation for capital investments and expedited external assistance from multilateral development banks. An additional allocation will also be provided this year for capital investments to spur economic growth in Andhra Pradesh.

The move has provoked ire from the Opposition, which has accused the government of appeasing its allies to remain in power.

Experts say a focus on infrastructure will give a fillip to several other linked sectors such as cement, real estate, housing finance, and others.

“The government’s continued focus on infrastructure development, including new road projects in Bihar, plug-and-play industrial parks in 100 cities, and 12 new industrial parks, in turn, augurs well for commercial vehicle demand, especially multi-axle vehicles, and tippers,” says Kinjal Shah, Senior Vice President & Co-Group Head-Corporate Ratings at credit rating agency ICRA Ltd. “The focus on developing tourism locations, as well as improving road connectivity in rural areas, augurs well for the demand for public transportation, including buses.”

While India aims to fast-track its way to a $10-trillion economy by 2035, implementation of these schemes will be crucial.

@richajourno