An Infra-Nirbhar Budget
ECONOMY & POLICY

An Infra-Nirbhar Budget

The Finance Minister has voted for growth. In fact, faced with adversities at hand, she delivered a positive outlook to mending India’s economy and nursing it back to health, says Pratap Padode.

________

Nirmala Sitharaman has tried to plug all leaking holes in the economy. For rising NPAs, she has proposed an Asset Reconstruction which would take over the 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 which 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 pre-paid smart metering and feeder separation, upgradation of systems very 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% higher plus a provision of Rs 2 trillion for States and Autonomous Bodies for capex is a great sign for 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 recent times, no Finance Minister has spent as much time of his or her budget speech as Nirmala Sitharaman did on 1 February 2021. She reiterated her commitment to the National Infrastructure Pipeline and updated that it was launched with 6835 projects but the project pipeline has now expanded to 7,400 projects and around 217 projects worth Rs 1.10 trillion have been completed. Apart from the higher capex, FM has also proposed an enhanced outlay of Rs 1.18 trillion for Ministry of Road Transport and Highways, of which Rs 1.08 trillion is for capital thereby strengthening its ability to leverage. By March 2022, awards of 8,500 kms and completion of an additional 11,000 kms of national highways has been indicated. This means a construction pace of 30 km per day. Similarly, a record sum of Rs 1.10 trillion for Railways of which Rs 1.07 trillion is for capital expenditure. Seven ports would be offered under PPP on landlord model basis.

For revenue mobilisation the FM has relied upon disinvestment and an asset monetisation programme which will house assets under a asset monetisation company which will hold assets including 

(i) NHAI Operational Toll Roads

(ii) Transmission Assets of PGCIL 

(iii) Oil and Gas Pipelines of GAIL, IOCL and HPCL 

(iv) AAI Airports in Tier II and III cities

(v) Other Railway Infrastructure Assets 

(vi) Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others

(vii) Sports Stadiums


4th Indian Cement Review Conference 2021

17-18 March 

Click for event info


Make in Steel 2021

24 February 

Click for event info


These will be using the InvIT route for monetisation. Debt Financing of InVITs and REITs by Foreign Portfolio Investors is being enabled. Clearly then 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 to create 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.

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 and 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 the capex among others. 

On an overall analysis, it appears that despite the pandemic, India is ready to bounce back.

Author: Pratap Padode is Editor-in-Chief, Construction World, & Founder, FIRST Construction Council.

The Finance Minister has voted for growth. In fact, faced with adversities at hand, she delivered a positive outlook to mending India’s economy and nursing it back to health, says Pratap Padode.________Nirmala Sitharaman has tried to plug all leaking holes in the economy. For rising NPAs, she has proposed an Asset Reconstruction which would take over the 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 which 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 pre-paid smart metering and feeder separation, upgradation of systems very 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% higher plus a provision of Rs 2 trillion for States and Autonomous Bodies for capex is a great sign for 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 recent times, no Finance Minister has spent as much time of his or her budget speech as Nirmala Sitharaman did on 1 February 2021. She reiterated her commitment to the National Infrastructure Pipeline and updated that it was launched with 6835 projects but the project pipeline has now expanded to 7,400 projects and around 217 projects worth Rs 1.10 trillion have been completed. Apart from the higher capex, FM has also proposed an enhanced outlay of Rs 1.18 trillion for Ministry of Road Transport and Highways, of which Rs 1.08 trillion is for capital thereby strengthening its ability to leverage. By March 2022, awards of 8,500 kms and completion of an additional 11,000 kms of national highways has been indicated. This means a construction pace of 30 km per day. Similarly, a record sum of Rs 1.10 trillion for Railways of which Rs 1.07 trillion is for capital expenditure. Seven ports would be offered under PPP on landlord model basis.For revenue mobilisation the FM has relied upon disinvestment and an asset monetisation programme which will house assets under a asset monetisation company which will hold assets including (i) NHAI Operational Toll Roads(ii) Transmission Assets of PGCIL (iii) Oil and Gas Pipelines of GAIL, IOCL and HPCL (iv) AAI Airports in Tier II and III cities(v) Other Railway Infrastructure Assets (vi) Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others(vii) Sports Stadiums4th Indian Cement Review Conference 202117-18 March Click for event infoMake in Steel 202124 February Click for event infoThese will be using the InvIT route for monetisation. Debt Financing of InVITs and REITs by Foreign Portfolio Investors is being enabled. Clearly then 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 to create 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.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 and 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 the capex among others. On an overall analysis, it appears that despite the pandemic, India is ready to bounce back.Author: Pratap Padode is Editor-in-Chief, Construction World, & Founder, FIRST Construction Council.

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