Attracting private investment key to push infrastructure

The Union Budget recognises the need to ramp up infrastructure investments to Rs 20 lakh crore a year, to put India on the 8% growth trajectory. 

Achieving this will need significant and rapid growth in private investments in infrastructure. In Railways, for example, the Budget points out that the annual requirement would be five times the current allocation of Rs 1.5-1.6 lakh crore a year. The finance minister has proposed an expert committee to recommend measures to channel long-term private capital to meet this need. 

In the Railways, a significant role of public-private partnership (PPP) is envisaged in completion of tracks, rolling stock manufacture and delivery of passenger and freight services. 

Though Railways had opened up to FDI earlier and also developed model PPP documents, several more preparatory steps would be required before private investment in this sector can be ramped up.

The proposed use of SPVs in partnership with state governments can help expand suburban rail and inter-city connectivity, and can also become a vehicle to attract private investment. 

The railway station modernisation programme is set to get a massive boost. The three railway station projects recently launched will pave the way for this scale-up.  

The announced steps like Credit Guarantee Enhancement Corporation, deepening of the corporate debt market, capital infusion in banks and easing investment in infrastructure debt funds and InvITs, would help in the process. 

The increased inflow into the Road and Infra Fund, from the cess on petrol and diesel, would certainly strengthen public sector spending. 

As one of the fastest-growing sectors, aviation finds particular mention in the government’s list of priorities. In addition to the development of several more regional airports, the Budget also envisages policy support for the growth of airport finance and leasing activities, as well as the development of the maintenance, repair and overhaul (MRO) industry. These have been industry demands for some time now.  

The national highway programme is proposed to be restructured, to expand the national highway grid using a financeable model. 

Emphasis has also been placed on developing state road networks. The rural roads programme under the Pradhan Mantri Gram Sadak Yojana continues to be a priority, with aggressive targets and corresponding funding. 

The inland waterways projects also continue to remain a priority, and can play a big role in reducing the cost of logistics in the country.

Various government investment-led schemes have improved connectivity in rural India, including electricity, and roads; and further schemes are envisaged for water and gas. 

The proposed use of the Universal Service Obligation Fund, along with PPP arrangement, can rapidly increase internet connectivity in rural India. 

Affordable housing continues to remain an important area, with increased funding support. Additional tax incentive for home loan takers could nudge demand. 

The proposal to boost rental housing can significantly improve credit flow into the sector. However, the process for getting state governments on board, and then building confidence in the investor community, could take some time. 

The proposal to monetise land parcels of central public sector enterprises, railway station modernisation and transit-oriented development plans, could create more opportunities in real estate. 

However, some success stories are needed before investors and developers feel more confident about government-linked projects.  

Tourism infrastructure is large sub-par in India, impacting the potential for job creation, even as more Indians spend foreign exchange on overseas holidays. 

The Budget proposes 17 iconic sites to be developed as world-class destinations. More details about the plan will likely be part of the relevant department. 

In conclusion, being the first Budget of the new government, it touches on various infrastructure sectors, providing continuity in some and offering a new direction to others. 

Delivering on these will require addressing concerns of current investors, as well as attracting new investors, domestic and international, into India infrastructure. 

The author is partner and leader infrastructure, PwC India