Sunday, January 23, 2022

India Unveils Multi-Million Capex For Infra Projects To Pep Up Economy

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In a unique compact among the productive stakeholders of the real sectors of the economy, the Government unveiled a jumbo infrastructure investment plan involving the Centre, the States and the private sector. The Union Finance Minister Mrs. Nirmala Sitharaman laid out the government’s salutary intent to invest more than rupees 102 lakh crore in infrastructure projects by 2024-25 with the Centre, the States and the private sector partaking of the capital expenditure (capex) in a 39:39:22 formula.  This will mark an appreciable augmentation over the last six years, when the Centre and the States together expended a humongous rupees 51 lakh crore on infrastructure.

At a time when the domestic economy is going through weak demand, it is an expedient way to deploy government investment as one of the levers to raise demand, the other two being government consumption expenditure and exports. The idea behind this stems from the irrefutable logic that a focused spurt in ‘capex’ (capital expenditure) of the government and the Central  Public Sector Undertakings (CPSUs), supplemented by proportionate increase by the States and the private sector depending upon their capacity, would help lift the slowdown syndrome and “crowding in” substantive and substantial investment for growth and development. In fact, the recent report of the International Monetary Fund (IMF) for the 2019 Article IV consultation with the Indian authorities pertinently stated that “in line with government plans, further emphasis should be put on addressing infrastructure bottlenecks”. It took due note of India’s recent efforts to beef up supply side of the economy through large investments in airports, roads, telecom and power generation.

It needs to be noted that on last Independence Day, Prime Minister Narendra Modi had announced plans to invest rupees 100 lakh crore in modern infrastructure in order to achieve a five trillion dollar domestic economy by 2024-25. So the authorities lost little time in putting into action the envisioned plan of the Prime Minister by swiftly setting up a task force of senior functionaries, chaired by Economic Affairs Secretary Atanu Chakraborty. It has, accordingly, identified rupees 102 lakh crore worth of projects in 18 States as part of a National Infrastructure Pipeline (NIP). Another rupees three lakh crore worth of projects are likely to be added soon, Mrs. Sitaraman said noting that the idea was not to exclude any State, albeit the fact that certain States were yet to put forward their pipelines.The rationale behind NIP as a policy pillar to prop up the economy emanates from the fact that well-developed infrastructure enhances level of economic activity, fosters additional fiscal space by improving revenue structure of the government, besides ensuring quality of expenditure focused in productive areas. NIP is purported to enable more infrastructure projects, grow businesses, create jobs, improve ease of living and extend equitable access to infrastructure for all so that the ill-effects of inequalities are minimized by an inclusive development programme.

The details disclosed show that irrigation and rural infrastructure projects would account for rupees 7.7 lakh crore each, rupees 3.07 crore would be spent on industrial infrastructure. Agriculture and social infrastructure would account for the rest. Road projects would constitute rupees 19.63 lakh crore while another rupees 13.68 lakh crore would be for railway projects. Port development projects would see spending of one lakh crore and airports another rupee 1.43 lakh crore. A massive rupees 16.29 lakh crore would be expended on urban infrastructure and rupees 3.2 lakh crore in telecom projects, expressways, national gas grid and Pradhan Mantri Awas Yojana-Grameen (PMAY-G).

It is gratifying that reform suggestions by various working groups under the infrastructure task force would be taken up in earnest to ensure that the adumbrated objectives of NIP are achievable. This would include, reforming the public-private-partnerships (PPP) based contracts, enforcement of contracts and dispute resolution process. Mrs. Sitaraman reassuringly remarked that “a robust monitoring mechanism will also be established”, presaging a glitch-free sailing for the NIP as it is rolled out from this year as a medium-term plan.

Script: G. Srinivasan, Senior Journalist

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