A look at budget allocation for infrastructure under the Modi government

When the Modi government announced its first budget in 2014-15, the government of the largest democracy had allocated Rs 1.91 trillion for infrastructure development.

Growing at a breathtaking phase through the consecutive budgets of the National Democratic Alliance (NDA) and touching Rs 4.94 trillions in 2017-18, the infrastructure sector received a push of Rs 5.97 trillions in the budget 2018-19.

For Narendra Modi’s government, infrastructure development of the country has been a prime focus area. While making his budget speech while presenting 2018-19 budget, Arun Jaitley, the Finance Minister remarked, “Our country needs massive investments estimated to be in excess of Rs 50 lakh crores in infrastructure to increase growth of GDP, connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways and to provide good quality services to our people."

In order to the augment the resources, the government levied a road and infrastructure cess of Rs 8 per liter on the petrol and diesel imported.

Jaitley said, “The government and market regulators have taken necessary measures for development of monetizing vehicles like Infrastructure Investment Trust (InvIT) and Real Estate Investment Trust (ReITs) in India. The government would initiate monetizing select CPSE (central public sector enterprises) assets using InvITs from next year."

The latest economic survey reveals that such measures will be operationalized provided the country will face a $526 billion gap in the investment towards infrastructure development.

Jaitley added, “Reserve Bank of India has issued guidelines to nudge corporates to access the bond market. Sebi (Securities and Exchange Board of India) will also consider mandating, beginning with large corporates, to meet about one-fourth of their financing needs from the bond market."

Announcing the most innovative and integrated infrastructure planning model, the National Democratic Alliance government launched the country’s largest ever rail and road budget through budget 2018-19 that saw an allocation of Rs 1.48 trillion and Rs 1.21 trillion respectively.

Way back while announcing the 2017-18 budget, Arun Jaitley said the cabinet had given a nod to the most ambitious Bharatmala (roads) scheme that will significantly strengthen the country’s roads network. To support this massive allocation requirement, the government said Rs 5.35 trillion as equity from the market. Jaitley’s talk emphasized that the nation required funds for some ambitious plans Sagarmala (ports) and Bharatmala to enhance its transport infrastructure to meet the growing needs of the largest democracy effectively.

“To raise equity from the market for its mature road assets, NHAI will consider organizing its road assets into special purpose vehicles and use innovative monetizing structures like toll, operate and transfer (TOT) and Infrastructure Investment Funds (InvITs)," stressed Jaitley.

Though the 2017-18 budget allocated Rs 73.31 crores for Airports Authority of India (AAI) from Rs 149.93 crores in 2017-18, AAI had to raise Rs 4,086 crores.

While commenting on the line of budgets by the NDA government headed by Narendra Modi, Jaijit Bhattacharya, partner and head, economics and regulatory at consultancy firm KPMG remarked.

“The budget demonstrates a very significant push on infrastructure, including rural infrastructure, as well as for immediate job creation as well as supporting long-term employability through education and skill development is very encouraging."