Gunning for Growth
Finance Minister Nirmala Sitharaman’s Budget for FY22-23 was delivered against the backdrop of the third wave of COVID and its impact. The Budget has increased the capex from Rs 5.5 lakh crore in FY21-22 to Rs 7.50 lakh crore in FY22-23 – the effective capex will be Rs 10.68 lakh crore in FY22-23. This is a commendable step that will translate to 4 per cent of GDP and be around 2.2 times the capex budget of FY2019-20. The doubling of capex in three years is truly a bold move. The finance minister has also involved the states in the capex programme by providing Rs 1 lakh crore support in FY22-23 by way of a 50-year interest-free loan.
Finance Minister Nirmala Sitharaman’s Budget for FY22-23 was delivered against the backdrop of the third wave of COVID and its impact. The Budget has increased the capex from Rs 5.5 lakh crore in FY21-22 to Rs 7.50 lakh crore in FY22-23 – the effective capex will be Rs 10.68 lakh crore in FY22-23. This is a commendable step that will translate to 4 per cent of GDP and be around 2.2 times the capex budget of FY2019-20. The doubling of capex in three years is truly a bold move. The finance minister has also involved the states in the capex programme by providing Rs 1 lakh crore support in FY22-23 by way of a 50-year interest-free loan. This will assist states in taking additional capex, adding to overall capex spending in the country. She has also announced the introduction of digital currency by RBI, another bold move. Sector-wise proposals are as follows: Roads: An increase to Rs 1.87 lakh crore as capex for FY 22-23 with a total allocation of Rs 1.99 crore and the construction of 25,000 km of new roads in FY22-23 were announced. The Government proposes to mobilise Rs 20,000 crore by monetisation of roads through innovative means like infrastructure investment trusts (INVITs) and toll-operate-transfer models (TOT) and Rs 19,000 crore has been allocated under the Pradhan Mantri Gram Sadak Yojana (PMGSY) to develop rural roads. Gati Shakti Mission: The Government aims to develop seamless logistics by integrating road, rail, river, multimodal logistics hubs, etc. The states will undertake development in line with the Gati Shakti master plan. A unified interface programme for tracking transportation of goods across all modes of transport has been proposed. This will help in ‘just in time’ delivery and plan logistics for goods. The development of four integrated logistics parks under PPP in FY 22-23 has been proposed. Railways: Announcements included an increase in allocation from Rs 1.17 lakh crore (RE) in FY21-22 to Rs 1.37 lakh crore in FY22-23; covering 2,000 km of railways under Kavach (a domestically developed technology for smooth operations); the introduction of 400 Vande Bharat trains in the next five years; new services for MSMEs and parcel services and the development of 100 stations with the theme of ‘One Station, One Commodity’ under the Gati Shakti Mission in the next three years, which will help in the movement of goods from such stations. It is proposed to link multimodal transport with the railway stations for smooth transportation. Metro rail and ropeway: New innovative models for PPP in metro rail and mass rapid transport have been proposed with an allocation of Rs 23,752 as capex for mass rapid transit system (MRTS) and metro projects. A committee will be set up to give guidelines for new projects. A ropeway will be developed in hilly areas to enhance transportation and increase tourist comfort. Eight projects of 60 km are slated for development under PPP in FY22-23. Jal Shakti Mission: Providing drinking water is a focus area of the Government with allocation increased to Rs 60,000 crore with coverage to 3.8 crore households. River interlinking: Five detailed project reports (DPRs) to link Damanganga-Pinjal, Par-Tapi-Narmada, Godavari-Krishna, Krishna-Pennar and Pennar-Cauvery have been finalised. The Government will take necessary steps in consultation with states to take this forward. An amount of Rs 1,400 crore has been allocated towards river interlinking of Ken-Betwa. Urban infrastructure: It is estimated that by 2047, 50 per cent of India will live in cities. To cater to this influx, it is proposed to develop model cities in Tier 2 and 3 cities. A committee will be set up to give guidelines for future city development incorporating multimodal transport and green energy generation. The allocation for urban infra has been increased from Rs 13,900 crore to Rs 14,100 crore in FY23. PM Awas Yojna: The allocation for providing houses to urban and rural citizens has been increased to Rs 34,000 crore. Rural infra: Various schemes for rural development are to be merged to ensure good quality roads, digital infra, drinking water and housing, in line with urban areas with all amenities. Renewable energy: A provision of Rs 19,500 crore has been proposed for renewable components like high-efficiency modules and cells for photovoltaic (PV) modules to help achieve 280 gw installed capacity by 2030. Green bonds will be introduced to mobilise resources for the renewable sector. An amount of Rs 6,153 crore has been allocated towards green energy development; Rs 600 crore towards setting up a 600-km green energy transmission corridor; and Rs 28,590 crore towards investment in IREDA and SECI – a bold step to boost renewable power funding. Customs duty has been increased on renewable project components in line with an earlier announcement to promote domestic manufacturing. Airports: An amount of Rs 600 crore has been allocated for regional connectivity by reviving 20 regional airports; commencement of 90 RCS routes and viability gap funding for Northeast connectivity. A new greenfield airport has been proposed at Hollongi in Arunachal Pradesh. Low carbon economy: A strategy for low carbon development for the industrial sector is intended to encourage the utilisation of new clean technologies in production to replace carbon-generating fuel and materials. Other proposals include the development of a green transport system and electric vehicle (EV) ecosystem; a battery swapping policy with inter-portability standards to develop an EV ecosystem and overcome battery charging infra shortcomings; and four coal gasification projects on a pilot basis to reduce carbon emission. Digitisation of land records: A single digital infrastructure will be set up for registration and transfer of land/real estate across the country. New addition to infra: Data centres and energy storage systems, including dense charging infrastructure and grid-scale battery systems, will come under the definition of infrastructure. This will help arrange long-term finance for these sectors with lower cost. Investment in infrastructure financing institutions: The Government infused Rs 20,000 crore in FY21-22 in the National Bank for Financing Infrastructure and Development (NABFID). NABFID will start lending in FY23 with target lending of Rs 2 lakh crore. It is proposed to allocate Rs 5,000 crore for investment in the National Investment and Infrastructure Fund (NIIF) for investment in their debt financing platforms. This will help increase the lending capacity of NIIF-promoted debt platforms. Surety bond: It is proposed to accept surety bonds instead of a bank guarantee. This will help manage bank limits and reduce bank guarantee cost. Sunrise sectors: The Budget targets investment in sunrise areas of growth like renewable energy and digital infrastructure. Evidently, the overarching focus is on growth. The revenue receipts are around Rs 22.02 lakh crore but expenditure has been planned for Rs 39.44 lakh crore with borrowings of Rs 16.61 lakh crore. The estimated receipts are on the conservative side as the revenue receipt in FY21-22 will be around Rs 20.78 lakh crore. It appears the Government will overshoot its collection targets, which will result in lower deficits. Overall, the Budget is growth-oriented with a fine balance in receipts and expenditure. It will help accelerate infrastructure investment, helping the country achieve its goal of a $ 5 trillion economy. About the author: Vijay Agrawal is Executive Director at Equirus Capital and heads the Infrastructure and Real-Estate Practice. He is also on the Editorial Board of CONSTRUCTION WORLD magazine.