By including infrastructure development among the Saptarshis or seven priority areas in her Budget proposals for 2023, Finance Minister Nirmala Sitharaman has once again emphasised the sector’s potential to both accelerate and sustain the country’s long-term economic growth.
The minister announced a significant increase of 33 per cent to Rs 10 lakh crore in the capex outlay for the infrastructure sector for the third year in the running. To be 3.3 per cent of GDP, it is nearly three times the 2019-20 outlay.
“This substantial increase in recent years is central to the government’s efforts to enhance growth potential and job creation, crowding private investments and providing a cushion against global headwinds,” Sitharaman told the Parliament.
Stakeholders and analysts saw this enhancement in capex as having a huge multiplier effect on the economy.
“The significant increase in budgeted capex of over 30 per cent YoY comes as a pleasant surprise, as it comes on the back of a Rs 7.5 lakh crore outlay in last year’s budget, which itself was a 35 per cent YoY increase. The government is focused on the high GDP multiplier effects of infrastructure spending, which constitutes a major part of this capex,” said the leader of government & public services at Deloitte India, Arindam Guha.
With states accounting for up to 25 per cent of the overall infrastructure spend, Guha also welcomed the over 30 per cent increase in allocation for them.
Partner at the law firm Shardul Amarchand Mangaldas & Co., Arvind Sharma, particularly welcomed the nine-fold enhancement in Indian Railways’ budget.
“Indian railway is a labour-intensive organisation and is also one of the largest employment providers. Rail transportation is energy and cost-efficient. Capacity building will increase passenger travelling and movement of goods, and the capital outlay of Rs 2.40 lakh crore should accelerate India’s growth,” said Sharma.
Boost to air connectivity
Senior vice president & group head of corporate ratings at ICRA, Shamsher Dewan, saw regional air connectivity receiving a further boost.
“The Union Budget 2023-24 has reiterated its focus on improving regional air connectivity through the setting up of 50 additional airports, heliports, water aerodromes and advanced landing grounds revival, all of which will help boost domestic air travel,” said Dewan.
He also said that the government’s plans to promote 50 tourist destinations on mission mode will also help in increasing international traffic to India.
Added the managing director for India subcontinent at the logistics player UPS, Deepak Shrivastava, “The plan to set up more airports and heliports and proposed urban infrastructure investments in Tier-2 & 3 cities will further strengthen regional connectivity, which is important to facilitate trade. Exports are key for global trade and for the logistics sector to be globally competitive to support India’s target of a $5 trillion economy.”
The government intends to promote infrastructure creation in Tier-II & III cities through the Urban Infrastructure Development Fund (UIDF), which is currently not covered under schemes like Attal Mission for Rejuvenation and Urban Transformation (AMRUT) and Smart Cities Mission.
Praising the continued hike in infrastructure capex, managing director of Essar Ports, Rajiv Agarwal, said, “An increased emphasis on promoting coastal shipping as a low energy mode of transport will be a critical enabler in transitioning towards green growth.”
Deloitte’s Guha, however, was surprised at the lack of incentives for private sector investments in infrastructure through initiatives such as credit guarantee schemes for public-private partnership (PPP) projects or a national platform for asset-backed securities that have worked well in several other countries.
“Such initiatives will possibly be spelled out subsequently by the newly established Infrastructure Finance Secretariat mentioned in the [finance minister’s] budget speech,” he hoped.
He also suggested that the UIDF would be augmented with the right technical capacity to assist states and cities in not only creating a pipeline of priority projects but also ensuring their completion.
“This would help address the usual problem of states and cities not being able to utilise budget outlays due to absence of required technical capability,” he observed.
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