The government’s vision to make India a $30 trillion economy by 2047 hinges on the growth of the infrastructure sector to a great extent. Budget 2025 brings out nine priority areas for Viksit Bharat focusing on agriculture, employment and skilling, inclusive human resource development, urban development, energy security, infrastructure, innovation and Next-gen reforms. A robust Infrastructure sector is an indispensable ingredient in the recipe of a developed nation and in the Indian context too, it is expected to serve as a focal point for all the priority areas.  

The macroeconomic foundation of the country has shown immense strength despite global uncertainties. India continues to shine with GDP growth of 8.2 per cent per cent in FY24, exhibiting price stability, a strong banking and financing sector riding on the back of robust growth in bank credit and multi-year low NPAs, along with stable external sector.   

This growth can be attributed to the continued focus of the government in boosting the infrastructure sector, which has forward and backward linkages with all sectors of the economy. India has made great strides in this sector, both in terms of quantity and quality of services provided. This physical infrastructure is well supported by meticulous schemes like the NIP-NMP-Gatishakti triad and proactive investment facilitation by the government.   

The Budget comes at a time when the infrastructure sector of the country is now coming of age with about 40-45 per cent of completed projects, as against majority under-construction projects with higher risks about a decade ago.  

This year in line with the interim Budget, the capex is maintained at ₹11.11 lakh crore, about 3.4 per cent of GDP.  Further, ₹1.5 lakh crore long-term interest free loans to support state infrastructure have been allocated.  Such budgetary allocation needs to be well supported by private investments. The government has rightly announced coming out a market-based financing framework and Viability Gap Funding to spur private sector investment. Along with this, it is also important to foster investor confidence by bringing out innovative structures such as having a tripartite agreement between lenders, borrowers and concessioning authorities to improve bankability of projects. Another potential measure that IIFCL is advocating is an insurance product to cover project completion risks - Project Completion Risk Insurance (PCRI). Here, the concessioning authorities shall subscribe to the insurance product to make Termination Payment, ultimately solving the problem of delayed payments being faced by lenders and reduce burden on the exchequer.   

Rural push

To boost employment and local economic activity, ₹2.66 lakh crore have been allocated for rural development, including infrastructure.  

For the road sector, PM Gram Sadak Yojana 4.0 has been announced that will help in providing all weather connectivity to 25,000 rural habitations. Further, in partnership with State governments and multilateral development banks, the government intends to promote water supply, sewage treatment and solid waste management projects and services for 100 large cities through bankable projects. This is expected to open up a window of opportunity for lenders like IIFCL to tap these sectors that will potentially improve the living conditions for the masses.  

With energy transition gaining traction at a global level, the government has announced its intention to come out with a document on energy transition pathway, which will help pursue low-emission pathways in line with national commitments. The government also intends to develop a taxonomy for climate finance to improve availability of funds for adapting to climate change and reduce greenhouse gas emissions. The government also announced a diversified energy plan focused on small, modular nuclear reactors, rooftop solar plants, and the development of indigenous technology for Advanced Ultra Super Critical (AUSC) thermal power plants with higher energy efficiency. The government also plans to come up with a policy to support pump storage projects to provide round-the-clock energy. This step would help tide over the issues related to intermittency of energy generation, and facilitate integration of renewable energy in the overall energy mix.    

A welcome step in this year’s Budget has been the announcement of dormitory-style rental housing for industrial workers through a PPP model. This initiative is expected to open up newer avenues of funding for lenders, offer a cost-effective housing solution for the masses.  

Land reforms

Further, the government intends to come up with an economic policy framework that would steer next-generation reforms. These include land reforms such as digitisation of GIS mapping in urban areas etc.  

The government also intends to bring out a financial sector vision and strategy document to prepare the sector in terms of size, capacity and skills, which will set the agenda for the next five years.   

With this year’s Budget, it is evident that government has embarked on an ambitious journey to revolutionise the country’s infrastructure landscape as it aims to becomes a Viksit Bharat by 2047.  

(The author is Managing Director, India Infrastructure Finance)

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