The new Union government's infrastructure spending is expected to drive the economy to new heights. Prime Minister Narendra Modi's second stint at the helm of the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government is likely to be marked by Rs 30 lakh crore spending on transportation infrastructure including the railways, highways and the ports.
Nitin Gadkari, who will continue as the minister of road transport and highways, Piyush Goel, who will continue as the minister of railways, and Hardeep Sing Puri, who will hold the independent charge of the ministry of civil aviation, have their tasks cut out in implementing the massive headline projects under the programme.
While economists are waiting for the dust to settle on the cabinet formation and portfolio allocation, the Indian Railways is expected to get a major chunk of the outlay amounting to some Rs 10-12 lakh crore, according to a report on Economic Times citing a statement from market research firm ICRA. The study, based on the BJP manifesto, also concludes that government might pump up to Rs 9 lakh crore into the roads and highways sector.
"Among the key segments, transport infrastructure is expected to see a major jump with an estimated Rs 25-30 trillion of capital outlay over the next five years," the report says quoting from the note by Shubham Jain of ICRA. "Such an investment will provide tremendous long-term benefits for the Indian economy. Construction companies are likely to be the major beneficiaries and will witness strong order inflows, estimated between Rs 15-18 trillion on the basis of these infrastructure capex plans," it says
The BJP manifesto has proposed to construct 12,000 km of national highways every year until 2024. ICRA said that the target was achievable given the length of highways constructed in 2018-19 touched 10,000 km.
For the railways, the manifesto has proposed the conversion of all viable rail tracks to broad gauge, electrification of all railway tracks, and the completion of the dedicated freight corridor projects by 2022, ICRA said.
The government is expected to maintain continuity on major programmes like Bharatmala Pariyojana (highways), Sagarmala (ports), railway station redevelopment programme, inland waterways development, Namami Ganga, Swachh Bharat Mission, UDAN (airports development), AMRUT and smart cities (urban Infra), launched during its last tenure, according to the report.
Experts expect the government to earmark at least Rs three lakh crore for urban infrastructure and Sagarmala projects that focus on port-led development. ICRA said that the government is expected to spend Rs two lakh crore on the development of 100 airports in the country under the Udan programme, while Rs lakh crore is likely to be invested for the development of inland waterways.
Experts think such large-scale increase in capital investments will require major policy reform push including providing a conducive environment for public-private partnership. The government will have to promote alternate avenues of fundraising like Infrastructure Investment Trusts and NIIF. Such an increase in public sector spending within the fiscal constraints amid a decelerating economy would require asset monetisation and asset recycling.
