Interim Budget 2024: Key Takeaways for Infra Sector

The Interim Budget for 2024-25, inspired by its predecessor, is essentially another step forward on the path towards achieving the vision of “Viksit Bharat” by 2047, which in the words of the Hon’ble Prime Minister will see the country in harmony with nature, with modern infrastructure and provide opportunities for all citizens and regions to reach their full untapped potential. In line with this vision and the objective of Amrit Kaal as the Kartavya Kaal, the primary focus of the 2024-25 Interim Budget is on a more comprehensive “Governance, Development and Performance” approach with plans for economic growth, inclusivity, and social welfare that is likely to ensure the continuity of earlier reforms while also laying down new ones.

A spending of Rs 47,65,768 crore has been proposed in this Interim Budget. It continues to focus on infrastructure development, by proposing to raise capital expenditure by 11.1 per cent amounting to Rs. 11.11 lakh crore which would account for about 3.4 per cent of the GDP, with the emphasis being on roads and power. There is a significant rise of about 2.8 per cent from the previous year in the funding of the road sector, with approximately Rs.2.78 lakh crore, making the Ministry of Road, Transport and Highways, the Ministry with the second highest budget allocation after the defence sector.

Under the PM Gati Shakti Scheme, three major economic railway corridor programs, namely, a) the energy, mineral and cement corridors, b) the port connectivity corridors, and c) the high traffic density corridors, are proposed to be implemented in the interest of enabling multi-modal connectivity. The resulting de-congestion of the high-traffic corridors is also expected to improve the operations of passenger trains which would enhance the travel speed and ensure the safety of passengers. Further, forty thousand normal rail bogies are proposed to be converted to the Vande Bharat standards to enhance safety, convenience, and the comfort of passengers.

The Interim Budget also seeks to support the rapidly increasing urbanisation by expanding urban infrastructure in large cities through the Metro Rail and NaMo Bharat, the new Regional Rapid Transit System (RRTS). In the aviation sector, the expansion of existing airports and a comprehensive development of new airports are sought to be implemented under the UDAN scheme of the Civil Aviation Ministry which envisages improved regional connectivity through the development of smaller regional airports allowing for greater and easier access to aviation facilities for common citizens.

A joint consideration of these proposals coupled with the proposed projects for port connectivity and tourism infrastructure in total, indicate the emphasis on improving the public transport infrastructure and general connectivity in the country. An increase in the allocation to the Telecom sector has been noted owing to the revival of BSNL. The Interim Budget also envisages long-term interest-free loans to the States for the development of tourist centres.

The Interim Budget’s focus on Green Energy and India’s commitment to achieving net zero emissions by 2070 has propelled various initiatives such as rooftop solarisation, viability gap funding for the harnessing of offshore wind energy potential for an initial capacity of one giga-watt, setting up coal gasification and liquefication capacity of 100 MT by 2030, phased mandatory blending of compressed natural gas and extending financial assistance for the procurement of biomass aggregation machinery. Further, stress was laid on the expansion of Electric Vehicle manufacturing and strengthening the supporting charging infrastructure which would not only create employment and entrepreneurial opportunities but also encourage sustainable development in the country.

In conclusion, the Interim Budget seems to hold promise that shall be tested for effectiveness based on the extent of development coupled with sustainability.     

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Photo by Vizag Explore on Unsplash

Under the PM Gati Shakti Scheme, three major economic railway corridor programs, namely, a) the energy, mineral and cement corridors, b) the port connectivity corridors, and c) the high traffic density corridors, are proposed to be implemented in the interest of enabling multi-modal connectivity. The resulting de-congestion of the high-traffic corridors is also expected to improve the operations of passenger trains which would enhance the travel speed and ensure the safety of passengers.

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Impact of Budget on the Infrastructure Sector

The Budget 2023-24 facilitates infrastructure development by providing for the establishment of a finance secretariat and giving prominence to infrastructure projects and programmes.

Introduction

During the budget announcement on February 1, 2023, the Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman highlighted that India’s per capita income has doubled in around nine years, and the country’s economy is expanding so rapidly that it is set to become the fifth largest in the world. The same is in line with the vision for Amrit Kaal, namely: –

  • Opportunities for citizens with a focus on youth
  • Growth and Job Creation
  • Strong and Stable Macro-Economic Environment

The term “Amrit Kaal” was coined by the honourable Prime Minister, Shri Narendra Modi for the first time on the occasion of India’s 75th Independence Day in 2021. The same was done while unveiling the country’s plans for the next 25 years. The purpose of Amrit Kaal was to improve and enhance the citizens’ quality of life and bridge the gap between rural and urban areas. It also sought to embrace emerging technologies while minimizing government interference in the lives of the citizens. With this vision, the Prime Minister stated, “While India has achieved quick progress, there should be a ‘saturation’ of development and 100 percent achievement, with every hamlet having roads, every family having a bank account, and every eligible person having health insurance, a card, and a gas connection”.

Budget Implications on the Infrastructure Sector

In the budget speech, the Finance Minister also stated that the Budget 2023-24 will adopt seven major principles and priorities that would serve as “Saptarishi” for the next quarter-century, which is expected to serve as a guide through the Amrit Kaal. The Finance Minister further specified that the Government’s aim for this Budget 2023-24 includes a technology-driven and knowledge-based economy, as well as strong public finances and a thriving financial sector.

The seven areas that the Budget 2023-24 primarily focuses on include:

  • Inclusive development
  • Reaching the last mile
  • Infrastructure and investment
  • Unleashing the capacity
  • Green growth
  • Youth Force
  • Financial sector

Under the ‘Saptrishi’ mantras, the Finance Minister outlined seven of the Union Budget’s top priorities for the year 2023, one of them being Infrastructure and Investments.

It is usually perceived that investments have a significant multiplier effect that enhances mobility, enables trade, development of employment opportunities, and increases the overall economic output. According to the Budget 2023-24, “Capital investment expenditure will climb by 33 percent to 10 lakh crore ($122 billion), or 3.3% of GDP, for the third consecutive year. This is about three times the expenditure in 2019-20”. This is likely to maintain financial stability and provide a buffer against global headwinds. This is also accompanied by a prolongation of the 50-year interest-free loan to state governments for another year, with a significantly increased expenditure of 1.3 lakh crore ($16 billion), to stimulate infrastructure investment and encourage state governments to take complementing policy initiatives.

To enhance opportunities for private infrastructure investment, the Budget 2023-24 envisages the creation of a new framework, the Infrastructure Finance Secretariat. The Infrastructure Finance Secretariat will aid all parties in their efforts to increase private investment in infrastructure, such as trains, highways, urban infrastructure, and power, which rely mostly on public funds. In addition, an expert committee will analyse the Harmonized Master List of Infrastructure to recommend the classification and finance system. The revitalization of fifty new airports, heliports, water aerodromes, and advanced landing fields is sought through the improvement of regional air connectivity. Further, one hundred essential transport infrastructure projects for last and first-mile connections for ports, coal, steel, fertiliser, and food grains industries have been identified to significantly boost India’s logistics sector.

These budget measures expand on the government’s National Infrastructure Pipeline (NIP) and other programmes, such as “Make in India” and the production-linked incentives (PLI) programme, to promote the expansion of the infrastructure industry.

Conclusion

The hike in capital expenditure by 33 percent to Rs. 10 lakh crore for infrastructure development for 2023-24 will certainly give a huge boost to the economy while increasing employment opportunities. There are positive strides in terms of the establishment of a finance secretariat that will in turn attract more private investment and the setting up of an expert committee will facilitate the appropriate classification of infrastructure and suitable financing framework. The Budget also takes infrastructure in Tier-2 and Tier-3 cities under its ambit by setting up an Urban Infrastructure Development Fund (UIDF) of Rs. 10,000 crore per year which will also promote innovation and reforms. The provisions created for metro and mass rapid transit system projects, sanitation, and urban housing look favourable for the growth of the country’s infrastructure. By reviving the infrastructure as well as facilitating infrastructure development in the future, the Budget significantly contributes to the economic growth and productivity of the country.

Image Credits:

Photo by Vlada Karpovich: https://www.pexels.com/photo/golden-gate-bridge-4449624/

The hike in capital expenditure by 33 percent to Rs 10 lakh crore for infrastructure development for 2023-24 will certainly give a huge boost to the economy while increasing employment opportunities. There are positive strides in terms of the establishment of a finance secretariat that will in turn attract more private investment and the setting up of an expert committee will facilitate the appropriate classification of infrastructure and suitable financing framework. The Budget also takes infrastructure in Tier-2 and Tier-3 cities under its ambit by setting up an Urban Infrastructure Development Fund (UIDF) of Rs 10,000 crore per year which will also promote innovation and reforms. The provisions created for metro and mass rapid transit system projects, sanitation, and urban housing look favourable for the growth of the country’s infrastructure. 

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