Budget 2021: Higher spends on infra, capex to help revive capital goods sector

Capital goods companies believe that the cascading effect of the government spending on capex and infrastructure will boost their order book and help them recover fast from the COVID-1 pandemic-induced slowdown.

Companies such as L&T, ABB India, BHEL, Siemens India, Thermax among others would benefit.

Sitharaman said the National Infrastructure Pipeline (NIP) - which was launched with 6,835 projects - has been expanded to 7,400 projects. Projects identified under the NIP require investment of Rs 111 lakh crore during 2020-25.

She said projects worth Rs 1.1 lakh crore have been completed under the NIP.

The Finance Minister said the government will soon introduce a Bill to set up development finance institution (DFI), providing Rs 20,000 crore to launch the National Asset Monetisation Pipeline to fund new infrastructure projects.

"As per the NIP, infrastructure investment in FY22 is projected at Rs 21.3 lakh crore, of which the Centre’s share is estimated at 39 percent and the focus is expected to be mainly towards transportation infrastructure, i.e. roads, railways, etc. With respect to infrastructure project financing, the NIIF (National Investment and Infrastructure Fund) could play a major role in channelising long-term funds," rating agency ICRA said.

ICRA added that dedicated allocations for specified large infrastructure projects announced such as Bullet Trains, Bharatmala, Sagarmala, Smart Cities, in-land waterways development, etc can help expedite these projects. Further, the budgetary allocation towards the National Highways Authority of India (NHAI) can be increased, keeping in view the increased capital outlay on national highway development. Investments on solid-waste management, waste water management, renewable energy will also boost capital goods industry.

The fiscal deficit target of 3.5 percent of gross state domestic product (GSDP) for the state governments for FY22 may allow them to prioritise a portion of the capital expenditure that had to be deferred during the pandemic, and provide some funds towards projects under the NIP.

"A large part of spending undertaken as part of the self-reliant India programme that provides emergency relief to the vulnerable could be redirected. Over the coming years, we believe the government is likely to channel those funds toward capital expenditures, which tend to provide a larger boost to growth," said Barclays India in its latest report.