Economic Survey calls for higher private sector financing to build quality infrastructure 

Economic Survey for 2023-24 has made a case for higher level of private sector financing and resource mobilisation from new sources for India to continue down the path of building quality infrastructure.

Facilitating this would not only require policy and institutional support from the Central Government, but State and Local Governments would have to play an equally important role, the Survey tabled in Parliament by Finance and Corporate Affairs Minister Nirmala Sitharaman on Monday said. 

The Survey highlighted that international experience showed how initiatives at the sub-national level can facilitate resource mobilisation for infrastructure development. Examples include pooled financing mechanisms for municipal projects, specialised municipal intermediaries, asset recycling programs, tax increment financing and land sales and development rights among other innovative approaches.

The Economic Survey highlighted that public investment has been pivotal in sustaining capital formation, with the private sector also beginning to invest significantly since 2021-22. “Capital formation is beginning to recover. Investment is being driven by both centre and states. Private capex has also recovered in 2021-22 and 2022-23”, Anantha Nageswaran, Chief Economic Advisor to Finance Ministry said here on Monday.

The Survey highlighted that transformative changes have dawned upon the infrastructure landscape of India in the last decade in terms of facilitative institutional architecture and the quality and stock of infrastructure assets. The consistent focus on road, rail and air connectivity, sanitation and digital infrastructure have brought in a considerable growth in assets in these sectors, it added.

However, infrastructure-creation efforts in India are predominantly public sector-led. As per the Infrastructure Monitor 2023 published by Global Infrastructure Hub and the World Bank, India’s investment in infrastructure was largely funded by the public sector – which includes the Government agencies and state-owned entities and banks.

Between fiscal year 2019 and 2023, the Central and State Governments contributed to 49 per cent and 29 per cent of the total investments, respectively, while the private sector contributed 22 per cent.

The need for better data capture

Economic Survey 2023-24 has stressed the need to improve data capture and reporting mechanisms for investments in infrastructure across instruments and sectors as well its composition across different projects on a granular level. 

A roadmap and an action plan for systematic collection of information on infrastructure-oriented financial flows are essential. Similarly, project wise and sector wise information on physical progress, now maintained in different formats and frequencies, need to be re-examined and revised to facilitate a complete picture, the Survey has said.

The Rangarajan Commission Report on Infrastructure Statistics (2001) had underscored the importance of collecting and maintaining a reliable statistical database for the infrastructure sector. Major strides have been made since then to collect data on policy direction, institutional strength, project performance and monitoring. However, data gaps persist in some key areas, the Survey added.

The Survey has highlighted that existing databases fall short on assessing the demand for infrastructure and tracking the utilisation of facilities. The construction of an index that tracks the utilisation rates would shed light on sub-sectors where there is either an oversupply or a shortfall, it added.