Budget 2023: First Budget of Amrit Kaal prioritises infrastructure with focus on roads & railways

The government on Wednesday reinforced its commitment on infrastructure creation as the first budget of Amrit Kaal proposes to enhance capital expenditure by 33 per cent to ₹10 lakh crore in FY24, amounting to 3.3 per cent of the country’s GDP

This is the third consecutive year when the government has steeply increased allocation for infrastructure with the Centre’s effective capital expenditure, including grants-in-aid to States, hitting ₹13.7 lakh crore, which is 4.5 per cent of GDP.

Furthermore, to reinforce the criticality of infrastructure in India’s growth, the government included ‘Infrastructure and Investment‘ as one of its seven priorities, which Finance Minister Nirmala Sitharaman, while presenting the Budget, said acts as “Saptarishi guiding through the Amrit Kaal.”

Allocations

The government proposed that capital investment outlay is being increased to ₹10 lakh crore. This includes capital outlay of ₹2.40 lakh crore for Railways, which is the highest ever and is about 9 times the outlay made in FY14. Similarly, the capital outlay for roads has been increased by 10 per cent y-o-y to ₹2.06 lakh crore.

Besides, the direct capital investment has also been complemented by the provision made for creation of capital assets through Grants-in-Aid to States. The Finance Minister has also proposed to continue the 50-year interest free loan to State governments for one more year with an outlay of ₹1.3 lakh crore. States account for around 20-25 per cent of the overall infrastructure spend.

The government also identified 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors with investment of ₹75,000 crore, including ₹15,000 crore from private sources.

The government intends to prioritise projects that have the potential to deliver quick returns with respect to higher private investment and reduced logistics costs.

Industry upbeat

Welcoming the development, REPL CMD Pradeep Misra said the higher capital outlay coupled with the 50-year interest free loan to States is going to have a spiral effect. “The challenge for the Finance Minister will be to keep the fiscal deficit in check,” he added.

JSA Partner Vishnu Sudarsan pointed out: “However, the focus and initiative to spur private investment in infrastructure still waits to be seen – there is a need for innovative models and true-blue public private partnerships to be revived and brought into play.”

Deloitte India Partner (Government and Public sector Leader) Arindam Guha said the focus is on the high GDP multiplier effects of infrastructure spending which constitutes a major part of this capex.

“What seems to be missing is any kind of incentivisation for private sector investments in infrastructure in the form of credit guarantee schemes for PPP projects or a national platform for asset backed securities, which have worked well in other countries. Such initiatives will possibly be spelt out subsequently by the newly established Infrastructure Finance Secretariat mentioned in the Budget speech,” he added.

The proposed Urban Infrastructure Development Fund (UIDF) is another noteworthy initiative as it would cover the Tier 2 and 3 cities which are not covered by schemes like AMRUT, Smart Cities Mission etc, Guha said.

Centrum Capital Managing Director (Infrastructure Advisory) Sandeep Upadhyay said that recognising funding requirements, particularly in urban infrastructure and municipal services, which is expected to cross $840 billion over the next 15 years, the Budget emphasised on the need of raising long term capital through Municipal bonds and setting up a new fund, UIDF.