An InfraNirbhar Budget!
ECONOMY & POLICY

An InfraNirbhar Budget!

The Finance Minister has voted for growth. Faced with adversities at hand, she delivered a positive outlook to mend India’s economy and nurse it back to health.

She has tried to plug all the leaking holes in the economy. For rising NPAs, she has proposed asset reconstruction that would take over existing stressed debt and then manage and dispose of the assets to realise value. She has also recapitalised public-sector banks by Rs.200 billion. For the DISCOM distress in the energy sector, she has proposed a revamped reforms-based, result-linked power distribution sector scheme that will be launched with an outlay of Rs.3.06

The Finance Minister has voted for growth. Faced with adversities at hand, she delivered a positive outlook to mend India’s economy and nurse it back to health. She has tried to plug all the leaking holes in the economy. For rising NPAs, she has proposed asset reconstruction that would take over existing stressed debt and then manage and dispose of the assets to realise value. She has also recapitalised public-sector banks by Rs.200 billion. For the DISCOM distress in the energy sector, she has proposed a revamped reforms-based, result-linked power distribution sector scheme that will be launched with an outlay of Rs.3.06 trillion over five years. The scheme will provide assistance to DISCOMS for infrastructure creation, including prepaid smart metering and feeder separation and upgrade of systems well tied to financial improvements. Against a provision of Rs.4.12 trillion for capital expenditure, an amount of Rs.4.39 trillion seems to have been spent during the year. Further, a provision of Rs.5.54 trillion, which is 34.5 per cent higher, plus a provision of Rs.2 trillion for states and autonomous bodies for capex is a great sign of the enhancement of infusion in the economy. For tending to the needs of long-term financing for infrastructure developers, a development finance institution with a capital of Rs.200 billion has been proposed, which is to build a loan portfolio of Rs.5 trillion over the next three years. In fact, in recent times, no Finance Minister has spent as much time on their Budget speech as Nirmala Sitharaman did on February 1, 2021. She reiterated her commitment to the National Infrastructure Pipeline, updating that it was launched with 6,835 projects but the project pipeline has now expanded to 7,400 projects with around 217 projects worth `1.10 trillion having been completed. Apart from the higher capex, she has also proposed an enhanced outlay of Rs.1.18 trillion for Ministry of Road Transport and Highways, of which `1.08 trillion is for capital, thereby strengthening its ability to leverage. By March 2022, awards of 8,500 km and the completion of an additional 11,000 km of National Highways has been indicated. This means a construction pace of 30 km per day. Similarly, a record sum of `1.10 trillion has been allotted to the Railways, of which `1.07 trillion is for capital expenditure. Further, seven ports will be offered under PPP on a landlord model basis. For revenue mobilisation, the FM has relied upon disinvestment and an asset monetisation programme that will house assets under an asset monetisation company, including NHAI operational toll roads; transmission assets of PGCIL; oil and gas pipelines of GAIL, IOCL and HPCL; AAI airports in Tier II and III cities; other railway infrastructure assets; warehousing assets of CPSEs such as Central Warehousing Corporation and NAFED, among others; and sports stadiums. These will use the InvIT route for monetisation. Debt financing of InVITs and REITs by foreign portfolio investors is being enabled. Clearly, borrowing through off-book methods like these will help shore funding while interest rates are at all-time lows. At a strategic level, the PLI (Productivity Linked Incentive) scheme has envisioned the creation of manufacturing global champions for 13 sectors with a commitment of nearly Rs.1.97 trillion over five years, starting FY 2021-22. This should trigger a wave of manufacturing activity across manufacturing hubs. Indeed, the Budget has signalled that the government is serious about harnessing its economic potential and has allocated serious capital expenditure. Its plan to raise resources has to be implemented dynamically. Yet, it needs to raise resources from alternate sources like the tax dispute resolution mechanism where even after a successful ‘Vivaad se Vishwas’ scheme, over Rs.8 trillion remains unresolved, or the use of ‘land pooling’ to reduce capex, among others. Overall, it appears that despite the pandemic, India is ready to bounce back. Follow me on twitter @PratapPadode

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