Budget 2021: Infrastructure - The Atma of Atmanirbhar Bharat!

The budget session of parliament begun on Friday with President’s address to both the houses of parliament. With presentation of Economic Survey, FM has started the process of presenting Budget for the year 2021-22. Budget is an important event every year for the economy. This year it is even more important coming on the background of unprecedented lockdown due to COVID -19 and the slowdown that followed it. Globally economies are still recovering from the shock including in India. As said by the Prime Minister during his interaction with media on the first day of parliament, we have been witnessing three four Mini Budgets during this year in the form of various stimulus government has announced in last 10 months. This budget should be an extension/continuation of that process.

 

 

 

The economic survey has given some positive signs of economic recovery. And undoubtedly Infrastructure sector had been leading this recovery. Ministry of Road Transport & Highways has created a history by constructing 534km of National Highways between 8th to 15th January this year. The Ministry has constructed 8,169 km of national highways from April 2020 to 15 January 2021 in the current financial year 2020-21 almost increase of 8%. This amounts to speed of almost 29km per day. During the same period in the last financial year 7,573 km roads were constructed, with an average speed of 26.11 km per day. This feet of achievement is even more significant as it has come during the times when economy has seen lockdown, migrant labours issues and a virtual standstill of activities everywhere. The ministry is confident that it shall surpass its target of 11,000 km by 31 March 2021 almost 30 km per day. Even the pace of award of contracts for road construction of national highway has doubled from 3,474 km in last fiscal to 7,597 km during this year. This increase in construction and awards also indicates government’s focus on infrastructure building. This focus on infrastructure has led to boost to economic recovery and growth. This has been possible because of series of bold reforms announced by Government during last few months.

 

 

As per NIP an investment of more than INR 100 lakh crore is envisaged in infrastructure sector until 2025, infrastructure development continues to play a key role in achieving the country’s economic aspirations. Sectors such as roads (about 20 percent of the total investments); urban and housing (16 percent), railways (14 percent); conventional power (12 percent); and renewable energy (9 percent) are likely to account for over 70 percent of the total investments. In terms of financing, the contribution of the central and state governments has been estimated at 39 percent each, with the balance 22 percent coming from the private sector. However, the mix varies widely by sector. For example, the central government’s share is estimated at more than 85 percent in a sector such as roads and railways, with the balance from private-sector. While there have been some signs of recovery, emphasized should be that economic recovery continues gain momentum.

 

 

 

The upcoming Budget will have to bear that load of infrastructure investments. This is more significant because the states due to pandemic-related disruptions, have high fiscal deficits and are hit severely on revenues. And they contribute almost 40% of the total infrastructure investments in India. The Centre needs to lead in raising funds for infrastructure projects. The Highway sector has seen continues increase in budgetary support since this government came to power in 2014. From approx. 30,000 crore in 2014 to 1 lakh crore in 2020-21. And this trend seems shall continue in this fiscals budget as well. The Highway sector is expecting an increase of at least 10/15 % in the budgetary outlay. India shall be hosting a G20 meet in 2022, new projects in Highways, Railways, waterways and Ports are already planned in NIP. Important is to ensure steady flow of funds for smooth closure of these projects.

 

 

Infrastructure development has been the mainstay of Hon’ble Prime Minister Narendra Modi’s government. There cannot be any second thought that Budget shall have to ensure adequate financial provisions for supporting infrastructure development. The multiplier effect of infrastructure development in generating more employments and entrepreneurial opportunities is undoubted. Significant recovery in the key economic and business indicators has instilled expectations of strong and sustained growth in the coming months. The obvious expectation is to increase spending on infrastructure and help aggregate demand.

 

 

A higher outlay in the budget for infrastructure shall lay a stronger foundation for a quicker economic recovery and a sustained economic growth. This will be the key ingredient to boost consumption for key sectors and shall help realize the vision of Atmanirbhar Bharat.

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