Union Budget 2022-23: Government banks on infrastructure development to boost economic growth

[ecis2016.org] In the Union Budget 2022-23, finance minister, Nirmala Sitharaman, made key announcements that aim to boost the infrastructure sector

In the backdrop of India’s 75th year of independence, a prevailing Omicron wave and upcoming elections across five Indian states, the Union Budget 2022-23 was presented by finance minister Nirmala Sitharaman on February 1, 2022. As many industry experts had anticipated, infrastructure push remained one of the focus areas for the government this year. Key announcements were made during the budget, to bolster major infrastructure projects and build employment potential, to promote economic growth in the country.

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The PM Gati Shakti master plan, which is a Rs 100 lakh-crore project, launched in October 2021, for developing holistic infrastructure in India, got a special mention as the finance minister called it a transformative approach for economic development and sustainability. She also talked about the government’s plan to expand the national highways network and the introduction of several measures to spur growth in the logistic sector.

Road and highway infrastructure

According to the government, this year’s budget focuses on providing a blueprint for the next 25 years, i.e., for India at 100. The infrastructure sector will receive a higher allocation this year, especially the road construction projects in the country.

Focusing on seamless logistics connectivity, the PM Gati Shakti master plan for expressways will be formulated in 2022-23 to enable faster movement of people and goods.

Sitharaman said that the PM Gati Shakti plan would be driven by the seven engines of growth, namely roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. She said that these engines would be supported by energy transmission, IT communication, bulk water and sewerage, and social infrastructure. The projects pertaining to the seven engines in the National Infrastructure Pipeline will be aligned with PM Gati Shakti Framework. The finance minister also said that the National Highways Network would be expanded by 25,000 kilometres in FY 2022-23.

With these initiatives, the government hopes to increase employment and entrepreneurial opportunities in India, especially for the youth.

The government proposed an allocation of 50-year interest-free loan of Rs 1 lakh crore to assist the states in catalysing overall investments in the economy in fiscal year 2022-23. These loans are over and above the normal borrowings granted to the states. This allocation will be used for the PM Gati Shakti related and other productive capital investments of the states, as per an official statement.

The logistics sector, like other industries, had been affected by the COVID-19 pandemic and support measures have become crucial for its revival, the FM said. Consequently, the government announced that it would develop 100 cargo terminals for multi-modal logistic facilities for robust logistics connectivity in the next three years.

In her speech, Sitharaman said that the data exchange between all modes of transport will be brought under a unified logistic platform created for application programming interface (APIs). This move will improve the movement of goods, minimise logistics cost and time, assist just in time inventory management and eliminate tedious documentation. The government will mobilise Rs 20,000 crores through innovative ways of financing, to complement the public resources. The finance minister added that contracts for implementing four multi-modal national parks will be awarded under the PPP model in the financial year 2022-2023.

Read all the latest updates about Union Budget 2022

Railway infrastructure

As per the official document, an outlay of Rs 1,40,367.13 crores for the Indian Railways has been announced for the financial year 2022-23, which is an increase of 27.5% over the previous year. Highlighting the fact that about 24,000 kilometres of railway route has been electrified over the last seven years, the government announced its plans to build a railway network with world -class technology and improved connectivity.

The government’s emphasis on the Atmanirbhar Bharat campaign was another major highlight of the Budget 2022. Last year, prime minister Narendra Modi had announced that 75 Vande Bharat trains would be connected to several parts of the country by 2023. Sitharaman announced that the government would develop 400 new-generation Vande Bharat trains with better energy efficiency and riding experience in the next three years. These indigenous trains would be made of lightweight aluminium.

The finance minister also said that the government would popularise the concept of ‘one station, one product’, to encourage local businesses and supply chains, developing projects mainly for the MSME sector. The rolling stock programme will see projects to the tune of Rs 1 lakh crore in the coming years, including the manufacturing of the new Vande Bharat train sets, high-performance freight locomotives and other products.

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Urban infrastructure

The government said that a high-level committee would be formed with experts, to formulate policies on urban capacity building and implement town planning schemes and transit-oriented development schemes. Talking about enhancing the metro systems in the country, the finance minister said that the design of metro rail structures would be standardised.

River interlinking projects

The Ken-Betwa link project, the first river interlinking project in India, received a budget allocation of Rs 44,605 crores. The finance minister said that the project would provide irrigation benefits to about 9 lakh hectares of farmland, drinking water to 62 lakh people, 103 MW of hydropower and 27 MW of solar power generation.

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She also added that draft DPRs for five river interlinking projects, namely, Damanganga-Pinjal, Par-Tapi-Narmada, Godavari-Krishna, Krishna-Pennar, and Pennar-Kaveri, had been finalised. These projects will receive assistance from the centre once consensus is reached among beneficiary states.

Budget 2022 sets the foundation stone for India’s growth story: Infra experts

As the country is focusing on economic revival and realising its dreams of a self-reliant India, the Union Budget 2022-23 promises to bring the country closer to its objectives. With higher spending allocated for the infrastructure sector, the government clearly aims to create more employment opportunities and strengthen the country’s economy.

Infrastructure experts view Budget 2022 as a growth-oriented budget and have welcomed the government’s initiatives aimed at strengthening the country’s infrastructure.

“The concept of India @ 100 introduced in the Budget has set the foundation stone for India’s growth story over the long term. The Gati Shakti national master plan spruced by seven engines of Infrastructure shall go a long way in developing a multi modal network to create world class infrastructure with full support on planning, financing, innovation and technology. The government spending and private investment shall create jobs at one end and also provide opportunities to investors. This will provide sunrise opportunities relating to energy transition, climate action, financing of Investments,” said Piyush Gupta, managing director, capital markets and investment services, India, Colliers.

Expressing his views on the Union Budget 2022, Vikas Singhania, CEO, TradeSmart, said, “Road construction has been given a boost, by increasing the target to 25,000 kms of National Highways construction. Comparing this to the current construction of around 13,000 kms, the target is almost double than the current level. Also, bringing all key transport ministries under the Gati Shakti plan is a positive step for the logistics sector.”

He further added: “Infra spending in PPP mode seems to be the thrust of the Union Budget 2022. Start-ups in the agriculture sector have been encouraged, with commitment to provide support for FPOs and technology including IT based support. The ECLGS extension up to March 2023 will aid the MSME sector’s financing needs. The support for agriculture start-ups in the union budget will make FPOs stronger, as well as strengthen the IT support.”

Key announcements were made during Budget 2022 to strengthen the warehousing and logistics facilities in the country. According to the experts, all these steps will pave the way for new employment opportunities and the country’s overall growth.

Shyam Arumugam, managing director, industrial and logistics services, Colliers India, said “The budget speech places thrust on clean technology in public transport, with plans to develop special mobility zones for electric vehicles and the introduction of a new battery swapping policy. This is a welcome move to facilitate further growth of EVs, as India moves towards its sustainability goals.”

Budget 2021: FM gives a boost to infrastructure development

Here is a detailed look at the finance minister’s announcements related to the infrastructure sector, in Union Budget 2021-22

February 1, 2021: As finance minister Nirmala Sitharaman presented her first ‘paperless’ Union Budget on February 1, 2021, a range of measures, focusing on key sectors, were announced to revive the COVID-19-hit economy. Of these measures, infrastructure received a sizable chunk of the total funds, which seemed more vigorous as compared to the last year. Here’s a detailed look at the FM’s Union Budget announcements related to the infrastructure sector.

The National Infrastructure Pipeline (NIP) announced in December 2019, was launched with 6,835 projects. As per Sitharaman, the project pipeline has expanded to 7,400 projects and 217 projects, worth Rs 1.10 lakh crores, have already been completed.

For financing infrastructure projects, the FM announced the creation of a professionally-managed Development Financial Institution and provided a sum of Rs 20,000 crores, to capitalise this institution. The aim is to create a lending portfolio of Rs 5 lakh crores in next three years. In addition to this, the FM also announced amendments for Debt Financing of InvITs and REITs, by foreign portfolio investors. This will also revive cash flow in the infrastructure sector.

The FM also announced a National Monetisation Pipeline, which will have potential brownfield infrastructure assets. Under this, all infrastructure projects will be monetized, to raise cash.

Budget 2021: Announcements for road and highway infrastructure

The FM said that more than 13,000 km length of roads, at a cost of Rs 3.3 lakh crores, had already been awarded under the Rs 5.35-lakh-crore Bharatmala Pariyojana project, of which 3,800 kms had been constructed. By March 2022, the government will be awarding contracts for 8,500 kms of highways and complete an additional 11,000 kms of national highway corridors, she said.

Sitharaman further announced new road economic corridors which includes:

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New flagship projects announced by the FM:

• Delhi-Mumbai Expressway: Remaining 260 kms to be awarded before March 31, 2021.
• Bengaluru-Chennai Expressway: 278 kms to be initiated in the current financial year. Construction will begin in 2021-22.
• Delhi-Dehradun economic corridor: 210 kms will be initiated in the current financial year. Construction will begin in 2021-22.
• Kanpur-Lucknow Expressway: 63 kms of expressway, providing an alternate route to NH 27, will be initiated in 2021-22.
• Chennai-Salem corridor: 277 kms of expressway will be awarded and construction will start in 2021-22.
• Raipur-Vishakhapatnam: 464 kms passing through Chhattisgarh, Odisha and north Andhra Pradesh will be awarded in the current year. Construction will start in 2021-22.
• Amritsar-Jamnagar: Construction will commence in 2021-22.
• Delhi-Katra: Construction will commence in 2021-22.

The FM provided Rs 1.18 lakh crores to the Ministry of Road Transport and Highways, out of which Rs 1.08 lakh crores is for capital expenditure.

Budget 2021: Announcements for railway infrastructure

• The FM said that Indian Railways had prepared a National Rail Plan for India – 2030. The plan would create a ‘future ready’ railway system by 2030.
• With an intention of bringing down the logistics costs, the Western Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022. In the first phase, East Coast corridor from Kharagpur to Vijayawada, East-West Corridor from Bhusaval to Kharagpur to Dankuni and the North-South corridor from Itarsi to Vijayawada will be undertaken.
• For passenger safety, high density and highly utilised network routes of the Indian railways will be provided with indigenously developed automatic train protection systems that will eliminate collisions due to human error.
• The FM provided Rs 1.1 lakh crores to the Railways, out of which Rs 1.07 lakh crores would be for capital expenditure.

Budget 2021: Announcements for urban infrastructure

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Two new technologies, MetroLite’ and ‘MetroNeo’ will be deployed, to provide metro rail systems at much lesser costs with the same experience, convenience and safety, in tier-2 cities and peripheral areas of tier-1 cities.

At present, a total of 702 kms of conventional metro is operational and another 1,016 kms of metro and RRTS is under construction in 27 cities.

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Central government will be providing its counterpart funding to the following cities:

Budget 2021: Announcements for port, water and shipping infrastructure

• Major ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them. For this purpose, seven projects worth more than Rs 2,000 crores will be offered by the major ports on public-private partnership mode in FY21-22.
• India has enacted the Recycling of Ships Act, 2019 and acceded to the Hong Kong International Convention. Around 90 ship recycling yards at Alang in Gujarat have already achieved HKC-compliant certificates. Efforts will be made to bring more ships to India from Europe and Japan.
• A scheme to promote flagging of merchant ships in India will be launched, by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs. An amount of Rs 1624 crores will be provided over five years.

ecis2016.org News’ viewpoint

While a number of these infrastructure projects were already announced earlier and are already running behind schedule, due to the COVID-19 pandemic, a fresh funding boost is always welcome. Also, most of the roads and highway announcements have come in poll-bound states, which means a lot of development will depend on the final verdict of the common man. One thing which went missing from Nirmala Sitharaman’s Union Budget 2021 speech was the ‘Smart City Mission’. The project, which was launched in June 2015, was supposed to develop 100 smart cities across India that would have flaunted excellent, high-end infrastructure and amenities. However, with funds lying unutilised, the ambitious plans to develop smart cities is yet to see a way forward.

(With inputs from Surbhi Gupta)

Infra experts say budget’s sectoral focus to boost economy

While acknowledging that the finance minister’s Budget 2018 was a populist one, prior to the elections in 2019, infrastructure experts, nevertheless, feel that it will provide a boost to the economy, which is pegged to grow at over seven per cent

February 2, 2018: Terming the Budget as populist, the infrastructure industry has welcomed the government’s focus on the sector, saying it will provide the necessary impetus, as the economy is pegged to grow at 7-7.5 per cent for 2018-19. “It is fair to say that this year’s budget is a populist one, focusing on providing social security at the grass root level. The various announcements and funding provided, are towards promoting the further growth of small scale industries, as well as improving infrastructure, particularly across rural India,” CBRE chairman, India and south-east Asia, Anshuman Magazine said.

According Surendra Hiranandani, Founder and MD of House of Hiranandani, the massive push for improvement in infrastructure, including significant capital expenditure for roads, railways and development of smaller airports, will indirectly benefit the real estate sector in the long run.

Savills India country manager – tenant representation, Bhavin Thakker said the extension of Rs 2,000 crores to the agricultural market and infrastructure fund will strengthen market connectivity, making real estate a preferred choice of investment, not only in metros but also in tier-2 and tier-3 cities.

“The government has taken the onus of constructing 35,000 kms of roads under the Bharatmala Pariyojana project, for which the Budget allocated is Rs 5.35 lakh crores, which aims to provide seamless connectivity in backward and border areas,” Action Construction Equipment ED, Sorab Agarwal said.

He further said the allocation of Rs 11,000 crores for Mumbai’s rail network, will definitely create a positive impact for the infrastructure sector. “The announcement of constructing 9,000 kms of national highways, will create job opportunities,” Agarwal added.

In his budget, finance minister Arun Jaitley has pegged capex at Rs 1.48 lakh crores for Railways, while allocating Rs 6,602.86 crores for the aviation sector. Hind Rectifiers’ CEO Suramya Nevatia, said the Railway’s focus on modernisation of signalling and safety systems, along with optimum electrification, will not only enhance efficiency but also move a large amount of trade traffic from road to railways.

“Most ancillary companies affiliated with rail infrastructure, should benefit on account of this huge proposed capex allocated for rail infrastructure,” he added.

Deloitte India partner Peeyush Naidu, said the budget had set the right course for the aviation sector. “It reaffirmed commitment to sustaining the growth in the sector, by focusing on substantial increase in airport capacity. The UDAN scheme is expanding the aviation network, through a transparent market-based model, as a result of which hitherto unserved airports and helipads will be connected by existing and new operators,” he said.

“The emphasis on building infrastructure with huge investments in railways, airways and highways, is seen as a step forward in building seamless network for smooth functioning for all inter-city operations,” SYSKA Group director, Rajesh Uttamchandani added. The government has estimated an investment of Rs 50 lakh crores in the infrastructure sector. “Infrastructure has been recognised as a growth driver of the economy. The investments in infrastructure are estimated to be in excess of Rs 50 lakh crores. This will support the growth of GDP and connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways,” Blue Dart CFO Aneel Gambhir said.

With the announcement of Rs 1.48 lakh crores allocated to Railways, the industry is hopeful of seeing a thrust on improving freight logistics, apart from better passenger connectivity. “This will help the logistics industry drive efficiency through rail networks, in terms of costs and CO2 reductions, as the current logistics movement is skewed towards road transport,” Apollo LogiSolutions managing director, Raaja Kanwar said. He further said the plan to expand the current 124 airports by five times, seems skewed in favour of passenger movement. However, the development of airports across the board is good, to build a robust logistics network. “We expect that freight movement is given due cognisance, as well,” Kanwar added.

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