BUDGET ON INFRASTRUCTURE DEVELOPMENT

[Mr. M. GOVINDARAJAN]

Introduction

The Indian economy got slow down due to COVID 19 for the past two years and also the present Omicron waves.  The Economic Survey indicates that the GDP of India is 8 – 8.5%.  The Government wants to increase the growth of economy in the current fiscal year and also the GDP @ 11.1%.  Therefore the present budget concentrated heavily on infrastructure development by which the expected GDP could be achieved.

India@100

The present budget seeks to lay the foundation and give a blue print to steer the economy over the next years from India at 75 to India@100  The Government aims to attain the following visions-

• Complementing the macro-economic level growth focus with a micro-economic level all-inclusive welfare focus,
• Promoting digital economy & fintech, technology enabled development, energy transition, and climate action, and
• Relying on virtuous cycle starting from private investment with public capital investment helping to crowd-in private investment.

In this regard, the Government lays down the following priorities-

• PM GatiSakthi;
• Inclusive development;
• Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action;
• Financing of Investment.

PM GatiSakthi

PM GatiSakthi is a transformative approach for economic growth and sustainable development.  This will be driven by seven engines-

• Roads;
• Railways;
• Airports;
• Ports;
• Mass Transport;
• Waterways; and
• Logistics Infrastructure.

These will be supported by Energy Transmission, IT communication, bulk water & sewerage and social infrastructure. The efforts of Central Government, State Governments and private sectors will be extended which will lead to huge job and entrepreneurial opportunities for the youth.

PM GatiShakthi Master Plan

This master plan will encompass the above seven engines for economic transformation, seamless multimodal connectivity and logistics efficiency.  The focus of the master plan will be on planning, financing including through innovative ways, use of technology and speedier implementation.  This plan will be world class modern infrastructure and logistics synergy among different modes of movement, both of people and goods and location of projects. 

Road Transport

The National Highways network will be expanded by 25,000 km in 2022-23. ₹ 20,000 crore will be mobilized through innovative ways of financing to complement the public resources.  The master Plan for Expressways will be formulated in 2022-23 to facilitate faster movement of people and goods. The expected new job creation is 60 lakh.  The expenditure to be allocated to the Road transport and highways in the present buget is ₹ 1,99,107.71 crores.

Multimodal Movement of goods and people

All operators will be brought on Unified Logistics Interface Platform (ULIP) which will provide for efficient movement of goods through different modes, reducing cost and time, just-in-time inventory management- reduction of documentation process.    The budget proposed to award for contracts of Multimodal Logistics Parks at four locations through Public Private Partnership (PPP) mode in 2022 – 2023.  100 Cargo terminals for multimodal logistics facilities will be developed in the next three years.

Railways

The railway proposes to develop new products and efficient logistics services.  This time the Railway will concentrate on  small farmers and SME.  The Railway will integrate with postal department to provide solutions for movement of parcels..

The budget proposes to introduce ‘One Station-One Product’ concept.  This concept is based on the successful ‘One District – One Product scheme.  This scheme has been introduced in the budget with a focus to promote the supply chain of local products using the Railways and making each Railway Station a promotional hub as show case destination for a local product.  This scheme will be popularized to help local business and supply chains.

The Finance Minister announced in her budget speech that 2,000 km of network will be brought under Kavach, the indigenous world-class technology for safety and capacity augmentation in 2022-23.  The Railway Minister said that indigenously developed anti-collision technology ‘Kavach’ is SIL4 (Safety Integrity Level) certified which means that there is a probability of a single error in 10000 years.

The Finance Minister also announced that one hundred PM GatiShakti Cargo Terminals for multimodal logistics facilities will be developed during the next three years.  The budget proposes to allocate expenditure to Railways to the tune of 1,40,367.13 crores.

National Ropeways development program

To improve the connectivity and convenience for commuters, besides tourism, the Finance Minister said that ropeways will be developed as a preferred ecologically sustainable alternative to conventional roads in difficult hilly areas, and that National Ropeways Development Programme will be taken up on PPP mode.  The budget proposes that the Government will award contract for 8 ropeway projects for a length of 60 kms in the year 2022 – 2023.

Telecom

The Telecom sector is on the way of introducing 5G to the consumers. The required spectrum auctions for 5G will be conducted in 2022 to facilitate rollout of 5G mobile services within 2022-23 by private telecom providers. Manufacturing of 5G equipments will be the part of the Production Linked Incentive Scheme.  For better broadband and mobile services 5% of annual collection under Universal Service Obligation Fund will be allocated.  It will promote R&D and commercialization of technologies and solutions. Bharatnet project will be completed by 2025 by which all villages at their residents will have access of all communication facilities. The Government proposes to allocate expenditure to Telecom sector ₹ 105406.82 crores

  The Government is expecting to fetch revenue ₹ 52806 crores from the telecom industry.  5G auction will fetch ₹ 1 lakh crores.

Infrastructure status

Data Centres and Energy Storage Systems including dense charging infrastructure and grid-scale battery systems will be included in the harmonized list of infrastructure. This will facilitate credit availability for digital infrastructure and clean energy storage.

Logistic cost

The logistics cost in India is 14% of GDP.  It is on the higher side when comparing with other developed countries in which the cost is 8 – 10%.  The Centre plans to reduce the cost to 10% over the next 3 years.  Economic Survey 2017-18 said that a 10% decrease in indirect logistics cost could lead to an export growth of 5-8%.  An efficient competitive and resilient logistics ecosystem is pivotal to boost exports.

Capacity building

The Central Ministries, State Governments and their infra-agencies, with the technical support of the Capacity Building Commission, will upgrade their skills.  By this the capacity in planning, design, financing and implementation of the management of PM GatiShakthi infrastructure projects will be ramped up.

Financial assistance to States

The Central Government, in order to strengthen the State Government’ announced a scheme for financial assistance for capital investment.  For the current financial year the allocation to this scheme is ₹ 1 lakh crore.  This loan is interest free for fifty years.  This allocation will be used for PM GatiShakthi related and other productive capital investment of the States, which will also include the following-

• Supplemental funding for priority segments of PM Gram Sadak Yojana, including support for the States’ share;
• Digitization of the economy, including digital payments and completion of OFC network, and
• Reforms related to building byelaws, town planning schemes, transit-oriented development and transferable development right.

CAPEX investment

The expected Revenue for the current fiscal year in the budget is-

• Revenue - 22,04,422 crores;
• Capital -   17,40,187 crores

Total     -   39,44,609 crores

Among the receipts the budget proposes to allocate Rs. 7,50,426 crores for capital expenditure to develop infrastructure.  Large investment in infrastructure will take the economy forward and create jobs. This strategy worked very well in India in the last years.  Therefore this year the investment is increased by 35.4% to ₹ 7.5 lakh crores - 2.9% of GDP.

It is true by improving the logistics the productivity will increase, the cost will be reduced there will be ease of doing business and making India more competitive.  Major opinion among the stakeholders is that there is an enhanced capex allocation in the present budget.

The allocation of ₹ 1000 billion to States for capital investment is a significant positive takeaway and sets the stage for enhanced collaboration in providing and delivery of infrastructure and capital investment projects.  For States to benefit from this nearly 7 fold increase in outlay.  The total capital expenditure of Centre with that of States will amount to 4.1% GDP.

Conclusion

GDP assumption of Government is 11.1% which implies low inflation. The former Governor of RBI told that a more realistic assumption for the budge would have been a nominal growth rate of 13%.  If the infrastructure as proposed in the present budget is implemented within the time frame then the raise of GDP @ 13% is possible.