This year’s budget is being crafted against a backdrop of disruptive global economic and geopolitical trends as well as significant internal challenges.
Among these are the slowing pace of GDP growth, structural issues affecting infrastructure and capital asset creation and the strains on government finances arising from a variety of factors, including lower-than-expected tax realisations.
These challenges, however, also pose an opportunity to focus on big-picture solutions and to unleash reform initiatives for reducing process barriers that tend to choke the free interplay of economic forces and commercial transactions.
It is expected that accelerating the pace of infrastructure creation and reviving allied flows of funding will be one of the primary themes of this year’s budget. The focus on infrastructure will of course bring about the twin benefits of not just addressing the country’s infrastructure deficit in critical areas such as roads, energy, logistics, infrastructure and basic rural and urban amenities, but also provide a much-needed booster dose to the slowing economy.
One of the most promising developments that has enormous potential to improve the quality of living, enhance access to information and skills and improve livelihoods is the rapid adoption of ‘invisible infrastructure’ in India, be it near-universal mobile phone access or enabling wired internet access to remote communities. On this front, too, it would be heartening to see some initiatives that enable the dream of universal connectivity for all.
India’s water situation cries out for renewed focus and effort. The government has launched the ‘Jal Shakti’ programme for enabling universal drinking-water access by addressing all the elements of the water cycle, ranging from source conservation to optimising irrigation utilisation. It is hoped that the budget will see fresh initiatives to address issues relating to water husbandry and access for all.
Reviving rural India’s agricultural economy, improved irrigation and enabling better access of agricultural commodities to markets are compulsions that cannot wait and the nation awaits some big-ticket initiatives that will bring a surge of optimism to rural India.
A key national compulsion is to revive the flagging levels of private investment in infrastructure creation. India’s experience with PPP (Public Private Partnership) projects has been mixed and a compelling requirement is to reform the policy and regulatory regime for ensuring a stable environment for private investment in large infrastructure projects.
The Vijay Kelkar committee had made a number of recommendations towards this end and it is hoped that some of the budget announcements will be on these lines.
There are expectations in the air that a new scheme may be launched for ensuring uninterrupted power supply for all with a slew of reform measures, including restructuring of the distribution companies. On the highway front, a further investment fillip seems to be imminent as well as possibly new models for recycling and monetising mature infrastructure for funding fresh investments.
The order of funding required for bridging India’s infrastructure deficit would require action on three fronts: enhanced budgetary flows, creation of institutions and instruments for off-budget financing (especially in the context of the recent crises in some of the infrastructure-financing institutions) as well as policy and regulatory measures to revive private financial inflows. It is hoped that this year’s budget will unveil some bold commitments, measures and policy initiatives to accelerate the pace of infrastructure creation and revive the economy.Authored by Elias George, Partner and National Head – Infrastructure,Government and Healthcare (IGH), KPMG in India and Rishi Shah, Associate Director, IGH Practice, KPMG in India