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Budget 2021: Why Infra Sector Needs Special Focus to Boost Recovery Post Pandemic

File photo of finance minister Nirmala Sitharaman. (PTI)

File photo of finance minister Nirmala Sitharaman. (PTI)

Industry associations have already recommended that public investments in agri-infrastructure be increased while healthcare expenditure as a percentage of GDP should be raised to 2% for building hospitals, training institutions and suchlike across India.

Each year, in the run up to the Budget, expectations from every sector start to skyrocket. This year it is even more so given the backdrop of the pandemic and the finance minister’s statement a few days back that she would “want to see a post-pandemic budget never seen before in 100 years”.

One sector that is expected to witness major focus is infrastructure.

While there have been some signs of green shoots, it should be emphasised that the economic recovery remains fragile. Therefore, in ascertaining that any recovery gains momentum, the upcoming Budget 2021 must front load infrastructure investments.

This is particularly needed because the states contribute almost 40% of the total infrastructure investments in India. But due to Covid-19 pandemic-related disruptions, the states have high fiscal deficits and are hit with liquidity issues. Therefore, the Centre needs to shoulder more of the burden of raising funds to drive infrastructure investments and projects.

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Industry associations have already recommended that public investments in agri-infrastructure be increased while healthcare expenditure as a percentage of GDP should be raised to 2% for building hospitals, training institutions and suchlike across India.

Given the Centre’s focus on its Atmanirbhar Bharat mission, infrastructure development can be vital in moving steadily towards achieving these goals. The Centre will be better placed in raising funding investments for the National Infrastructure Pipeline (NIP), which may include both public and private sector funds. Projects worth Rs 44 lakh crore are already being implemented as part of the Rs 111 lakh crore NIP, with the latter amount slated to be spent by 2024-25.

Also, the Finance Ministry has already notified the VGF (viability funding gap) Scheme. Through this, select infrastructure projects would be given financial support for facilitating implementation.

Also read: Budget 2021: Expectations of Indian Auto Industry - Tax Reduction to Vehicle Scrappage Policy

Another Central initiative to boost infrastructure projects is the Rs 1.46-trillion ($20 billion) Production-Linked Incentive (PLI) Scheme, which aims at attracting global manufacturers to boost indigenous manufacturing. But the criticality of proper implementation in the above projects cannot be overemphasised. A report from the Union Ministry of Statistics and Programme Implementation is revealing. Out of the 1,634 infrastructure projects it tracks, as many as 552 were delayed. In other words, one out of three large projects gets delayed. Additionally, 373 projects recorded cost overruns.

The industry expects that the Budget should have adequate financial outlays for infrastructure development due to its association with greater growth while generating more employment and entrepreneurial opportunities. Since infrastructure development also boosts other industries and facilitates the ease of doing business, it fosters inclusive growth and helps in poverty alleviation too. In the light of the above, to boost a quicker economic turnaround, the Union Budget 2021 should ensure greater outlays for infrastructure development.

first published:January 26, 2021, 12:23 IST
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