Ramesh Bawa
The Union Budget 2018 presented on February 1, 2018 by the Finance Minister Mr Arun Jaitley has been welcomed as a constructive and reassuring budget reflecting, government’s focused vision for boosting agricultural and rural economy and the infrastructure spending through the public exchequer, while encouraging greater involvement of private sector participants. It was current Government’s last full year budget ahead of the general elections to be held in 2019.
The various bold reforms undertaken in the diverse sectors through this union budget, has disseminated the clear signals that government’s inclusiveness policy will pave a way for the sustainable development of Indian economy as a whole. This gets substantiated as the government’s focus has not only been on ‘Ease of Doing Business’ but the announcement to build 1 crore houses by 2019 in rural areas under the mission ‘Housing for All by 2022’ has shown government’s focus on ‘Ease of Living’ as well
The government has made an all-time high allocation to infrastructure sector. The estimated budgetary and extra-budgetary expenditure on infrastructure has been increased to Rs 5.97 lakh crore for fiscal year 2018-19, this will certainly contribute to economic growth, connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways.
India’s infrastructure financing requirement has been estimated as approximately Rs 50 lakh crore in the next five years, and given the government’s focus on social sector spendings such as healthcare, rural economy and agriculture, it’s necessary to explore alternative means of financing and attract private investment for funding infrastructure projects. The union budget has done a great job in recognizing the need for alternative means of infrastructure finance.
The union budget has proposed that the corporate sector should raise at least one-fourth of their funding requirement through bonds, while reducing the regulatory minimum investment grade to ‘A’ from ‘AA’. This would eventually make corporate bond market more deep, wide, liquid and vibrant in the country.
The bank recapitalization program of Rs 80,000 crore will further pave way for public sector banks to lend additional credit of Rs 5 lakh crore, these initiatives will support the infrastructure sector in a large way, that’s grappling for additional funds.
Infrastructure Building for Tomorrow’s India
The ambitious Bharatmala Pariyojana with an estimated cost of Rs 5.35 lakh crore has been approved. The railways’ capital expenditure for the fiscal year 2018-19 has been proposed at Rs 1.48 lakh crore. The government stated that additional 3.7 million homes will be built in urban areas in 2018-19, and 5.1 million homes in rural areas. These initiatives will create job opportunities and facilitate generation of employment.
India will require around $4.5 trillion in the next 25 years for infrastructure development, of which it will be able to garner about $3.9 trillion, according to the Economic Survey. Hence, India to realize its infrastructure dreams, the government must revisit public–private partnership (PPP) models and re-instate confidence into the private sector, which’s lagging at this point of time.
The center needs to develop a rational pricing system, a better regulatory mechanism, strengthen dispute resolution mechanisms, and reform financial markets, so that infrastructure projects become economically feasible for the private sector.
The infrastructure sector has always received special attention and increase in budgetary allocations in every budget, since the government had come to power in 2014. The center has always displayed consistency and coherence on infrastructure policies.
It is very heartening that Prime Minister personally reviews the targets and achievements in infrastructure sectors on a regular basis. And, by using online monitoring system of PRAGATI alone, projects worth 9.46 lakh crore have been facilitated and fast tracked. Nevertheless, an enhanced budgetary allocation, institutional mechanism for impartial pricing and competition, and vibrant financial markets is required for achieving India’s long-term growth potential.
Author is MD & CEO, IL&FS Financial Services Ltd (IFIN)
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