The Economic Survey 2025 has called for the "wholehearted acceptance" of public-private partnerships (PPPs) in several infrastructure projects across the country.
“We need to ensure increasing private participation in infrastructure by improving their capacity to conceptualise projects and their confidence in risk and revenue-sharing mechanisms, contract management, conflict resolution and project closure,” it said.
In its previous edition, the survey had raised the same issue, exhorting the private sector to invest more in capital expenditure, indicating that private participation in infrastructure continues to be below the expectations of the finance ministry even now.
“The efforts of the Union Government would need to be supplemented with wholehearted acceptance of the need for public-private partnerships in infrastructure across the country. Equally important, the private sector must reciprocate, too,” the survey said.
The strategy to step up private participation, according to the survey, needs coordinated action of all stakeholders involved --- governments at different tiers, financial market players, project management experts and planners, and the private sector.
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"Capacities to conceptualise projects, develop sector-specific innovative strategies for execution, and develop high-expertise areas such as risk and revenue sharing, contract management, conflict resolution and project closure need to improve substantially," it said.
The survey said there is still significant unmet demand for infrastructure development in the country, despite the union government’s “earnest efforts”, and the efforts of some state governments and public sector undertakings.
“Quite clearly, public sector efforts cannot fully meet these requirements. There are binding Budget constraints to the different tiers of government. Private participation should accelerate in many critical infrastructure sectors in many ways—programme and project planning, financing, construction, maintenance, monetisation and impact assessment,” it said.
The apex economic assessment document of the government cited debottlenecking and facilitatory mechanisms like the National Infrastructure Pipeline, National Monetisation Pipeline and PM-Gati Sakti that have made progress.
“Financial market regulators have introduced reforms to encourage private participation. Yet, the uptake of private enterprise is limited in many core sectors,” the survey said.
PPPs have only been successful in limited sectors so far.
Moreover, the government’s clarion call for private capital expenditure has not borne desired results so far, with growth slipping in the previous quarter as the pace of government capital expenditure slowed down after the general elections.
While numbers of infra development have gone down, Economic Survey said that it's normal for an election year, with the Lok Sabha elections in 2024 putting caveats on project tendering and execution.
“The capital expenditure of the union government for FY25 has been budgeted at about 3.3 times the capex for FY20. In Q1FY25, the constraints on new approvals and spending during the general elections, coupled with heavy monsoon in many regions, affected the progress of the infrastructure spending.
Between July and November 2024, the pace of capex has picked up,” it said.
The addition to the rolling stock of railways, port handling capacity and power and transformation capacity improved during FY25 so far on a Y-o-Y basis. The addition to the length of highways, roads and railway lines has been modestly lower, according to the survey.
From April to December 2024, Rs 16,456 crore was raised by Real Estate Investment Trusts (Reits) and Infrastructure Investment Trusts (InvITs).
Meanwhile, the bullet train project has seen expenditure of 62 per cent of its approved cost.
“Sanctioned in December 2015, this 508 km project, supported by Japan, has a revised cost of Rs 1.08 lakh crore. As of October 2024, it has achieved 47.17 per cent physical progress with an expenditure of Rs 67,486 crore,” the survey said.
Infrastructure experts call for ease in policies and flexibility in the labour market.
“The Union Government’s infrastructure push must be complemented by policies that enhance ease of doing business, increasing flexibility in the labour market and de-risk private sector participation in mega projects,” said Vivek Lohia, managing director of Jupiter Wagons, a rolling stock manufacturer.
“The government has already taken significant steps with initiatives like the TULIP programme, which has connected urban local bodies with young talent, creating over 49,000 internship opportunities. However, the way ahead demands a sharper focus on deregulation of labour norms, research and development, strategic skilling, and targeted support for MSMEs to unlock India’s full economic potential,” he added.
