Govt increases portfolio of infra projects, raises spending to Rs 111 trn

The estimate has been made for the five-year period ending 2025

India’s infrastructure investment target for the next five years has got bigger, with a task force increasing the figure to Rs 111 trillion from its initial projection of Rs 102 trillion in December last year. The task force on National Infrastructure Pipeline (NIP) submitted its final report to Finance Minister Nirmala Sitharaman on Wednesday. The increase is significant as it comes at a time when India is looking at a sub-2 per cent economic growth rate owing to the Covid-19 pandemic.
 

The private sector’s share in this spending, however, would be a tad lower at 21 per cent from the earlier estimate while there is a one-percentage-point increase in the share of state governments at 40 per cent, with the remaining 39 per cent coming from the Centre. An interim NIP report in December had pegged the Centre and state share at an equal 39 per cent.
 

Earlier this month, Reserve Bank of India Governor Shaktikanta Das quoted the International Monetary Fund’s projection of 1.9 per cent GDP growth for India. Prior to the Covid-induced lockdown, the RBI had in February projected 6 per cent growth.

Lower GDP projections have a bearing on the viability of infrastructure projects.

“Risk perception is currently very high. It is difficult to do forecasting for making projects bankable because no one is sure about how the economy will pan out,” said Arvind Mayaram, infrastructure expert and former finance secretary to the Union government.

Mayaram said the economy was sinking sharply and if such a portfolio of projects was being thought of as a package for recovery, it would not make much of a difference since the spin-off benefits take at least six months to two years. Besides, the fiscal position of the states and the Centre limited their funding capability, he added.
 

With the submission of the final report, the government has also decided to host project database on India Investment Grid to provide visibility to projects and help in its financing with prospective investors. This would mean that the share of private sector in spending could change depending on attractiveness of the projects.

The infrastructure spending target for 2020-25 was revised because of additional and amended data provided by central ministries, state governments since the release of the summary NIP Report in December 2019 when it was pegged at Rs 100 trillion.

The task force has recommended that a committee be set up to monitor NIP progress and eliminate delays. Besides, a steering committee at the infrastructure ministry-level should be set up for following up on implementation and another in the economic affairs department for raising financial resources for the NIP.

Each line ministry and the state concerned would add new projects and update their respective project details at pre-defined time intervals so that updated data is available to prospective investors. “It aims to improve project preparation, attract investments (both domestic and foreign) into infrastructure, and will be crucial for target of becoming a $5-trillion economy by FY25,” said a government statement.
 

Of the total expected capital expenditure of Rs 111 trillion, projects worth Rs 44 trillion, or 40 per cent of the NIP, are under implementation, projects worth Rs 33 trillion (30 per cent) are at the conceptual stage and projects worth Rs 22 trillion (20 per cent) are under development.

Information regarding the project stage is unavailable for projects worth Rs 11 trillion, or 10 per cent. Sectors such as energy (24 per cent), roads (18 per cent), urban (17 per cent) and railways (12 per cent) amount to around 71 per cent of the projected infrastructure investment in India.
 

In addition to updating existing sectoral policies, the report also identifies and highlights a set of reforms to scale up and propel infrastructure investments in various sectors throughout the country.
 

The report has also suggested ways and means of financing the NIP through deepening corporate bond markets, including those of municipal bonds, setting up development financial institutions for infrastructure sector, accelerating monetisation of infrastructure assets and land monetisation.