Infrastructure required greater focus in budget

The maiden budget of the Modi government has some excellent features, but lacks details on policy implementation; the key institutional gap in most programmes. The economic survey had earlier pegged growth projection at 5.4-5.9 per cent. This reflected an assessment that uncertain implementation and drought conditions may make firm projections difficult. Planning commission studies had earlier confirmed the need for good infrastructure which can act as a driver for economic growth. The 12th plan had envisaged an investment of $1 trillion in infrastructure and investment/GDP rate was expected to increase to 9 per cent of GDP. But how these goals are to be achieved is not clear from the budget.

The railway budget had made an excellent beginning. However, it didn’t mention how to get funds from PPP and increase resources. It missed out on the corporatisation route to raise resources. While eschewing populism, which by itself, was very creditable, there were major gaps on how the promises would be fulfilled.

Power, road, port and airport sectors have major implementation and development issues. Finances, both equity and debt, are needed. Environment policies on project clearance, particularly on coal blocks and iron ore mines, still need clarity to step up domestic production. The budget has provided solutions which do not go far enough, but it has several attractive features.

Fiscal consolidation is strongly focussed with fiscal deficit pegged at 5.1 per cent in the current year and going down to 3 per cent by 2016-17. The formation of an expenditure management commission to suggest specific measures for expenditure control has been announced. The large funds, which were being used under Nrega, would now be restricted by more productive use, which would in turn help control inflation. The provision of more than Rs 7,000 crore to meet expansion of urban infrastructure are positive steps. The speech recognises the need for recycling of waste water and solid waste management in urban areas.

In the field of infrastructure, the budget has addressed some of the sector’s concerns, though half-heartedly. In the area of power, while the finance minister has done well to give a long-term policy of taxation benefits, provision of Rs 500 crore for 24x7 power does not take into account the World Bank report and states’ concerns in terms of providing power to rural areas.

The programme for expansion of rural roads and several other measures for rural development would help to strengthen rural infrastructure. Many companies — which are leading players in road construction — have disputes with National Highways Authority of India (NHAI) and lack finances, both debt and equity. There is nothing in the budget to indicate how this sector would be energised. There is a brief mention of revision of PPP agreements in future, but it would leave existing players untouched.

The budget makes a brief mention about development of airports in tier I and tier II cities. There is, however, nothing to indicate that the government is providing any additional financial support to ensure success of this proposal.

The initiatives on shipping are multifaceted. The PPP initiatives, which are planned at 16 ports next year, are likely to get good response. The support for expansion of coastal shipping and inland waterways are positive steps.

The thrust on fiscal consolidation, rural infrastructure, urban metros and support to urbanisation are good developments. The budget, however, does not fully recognise the present problems in the power and road sectors and fails to indicate solutions. It makes bland statements in many areas without any indication of policy support. This leaves one with an impression of good intentions not fully backed with a concrete implementation roadmap.

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