Budget 2022: How the capex push through infrastructure is likely to play out

With the announcement of a 35.4 per cent increase in public capital investment, the Union Budget 2022-23 has laid down the path for a capex driven growth during India's Amrutkaal (i.e., the 25-year long period leading up to the 100th anniversary of Indian independence). 

The increase in capex, which has been stepped up from nearly Rs 5.54 lakh crore last year to around Rs 7.50 lakh crore in this year's Budget, is 2.2 times more than the spend of FY 2019-20 and will account for 2.9% of India's GDP. 

The infrastructure push provided by the Budget against the backdrop of economic recovery from the pandemic will be propelled by seven engines of growth which will be guided by the PM Gati Shakti National Master Plan and include roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure. 

Also Read: Massive capex budget, a bold move in 'Amrit Kaal' for Aatmanirbhar Bharat  

The slew of infrastructure development plans announced by Union Finance Minister Nirmala Sitharaman included, amongst others, a 25,000 km expansion in the existing network of national highways and the development of four multimodal logistics parks, 100 cargo terminals, and 8 ropeway projects under the Parvatmala scheme. 

The implementation of these projects will not only augment connectivity but also yield enormous benefits for India's logistics sector and the positive ripple effects on the construction industry as a result of execution of these projects will be an added advantage.  

PPP was the buzzword in this year's Budget speech and nearly all infrastructure development plans, including the ones noted above, will be executed through the PPP model. 

The greater scope of private sector participation in nation-building is a welcome move and will go a long way in ensuring quality in future infrastructure development. 

The Budget speech also recognised the limited contribution of the private investment in infrastructure development and it is expected that the increased deployment of public capital will pump prime the private investment in the infrastructure space and help attain the goal of creating a virtuous cycle of investment. 

Also Read: Budget 2022: FM Sitharaman raises capex outlay by 35.4% to Rs 7.50 lakh cr

The announcement of issuance of sovereign green bonds to fund the development of green infrastructure in public sector projects will open up avenues for the government to meet its capex requirements and also lead to the addition of green assets in the National Infrastructure Pipeline. 

The enhanced capex, the National Infrastructure Pipeline and the PM Gati Shakti National Master Plan will form the holy trinity of India's infrastructure development endeavours and ensure coordinated and timely implementation of projects. 

The continued focus of the Budget on supply side reforms while keeping the infrastructure sector as its cornerstone will act as a booster dose of growth for the Indian economy and is expected to bring it one step closer to the goal of becoming a 5-trillion-dollar economy. 

A proper and prompt implementation of the laudable Budget announcements will not only lead to the creation of a world-class modern infrastructure but will also create employment opportunities for India's young populace. 

This macroeconomic growth coupled with the microeconomic focus on welfare will most certainly put the Indian economy on track to a resilient, sustained and holistic development. 

(Ajay Sahwney, Partner; and Mayank Udhwani, Associate; at Cyril Amarchand Mangaldas.)