 "Budget 2023-24 Expectation: Why infrastructure will be the centre of government focus")
Since the last few years, the government has used the Union Budget as an opportunity to get closer to its vision of India@100. This includes the launch of mega initiatives like the National Infrastructure Pipeline, Production Linked Incentive (PLI) Scheme, Gati Shakti National Master Plan, National Monetization Pipeline, etc.
Ease sector funding, financing issues
While this Budget is likely to make allocations to further bolster the implementation of these mega-initiatives, it may be a good opportunity to also think about ways to ease sector funding and financing issues, improve private participation, encourage sustainable development, and move towards resilient infrastructure planning.
Government capital expenditure has increased by 25 per cent from FY19 to FY23 (expected). The focus during this time has been on removing the bottlenecks in infrastructure planning and driving public agencies toward execution.
For instance, the government launched the National Infrastructure Pipeline (NIP) with > 8900 projects worth >$1790 billion with transparency on plans and execution status. This gave the industry great clarity on priority projects and planned expenditure. However, with only 10 per cent of completed projects on a PPP/ private basis, NIP is largely driven by public funds. Given the pressure to bring in fiscal discipline and the existing infrastructure gap, it would be important to crowd in private investment.
NMP is likely to miss the FY23 target
To ease the infrastructure financing needs, the government has set up the National Bank for Financing Infrastructure and Development (NaBID) as the principal financial institution for lending across the life cycle of infrastructure projects. In addition to this, the national monetization pipeline and sovereign green bonds have also been launched. While the NaBID lending may accelerate in the future, NMP is likely to miss the FY23 target due to lower-than-projected monetization of assets, and green bonds will hit the market only by Q4 FY23. Thus, funding is still an issue that needs to be actively worked on.
Impact Shorts
More ShortsLastly, as part of the latest G20 summit, India has pledged towards more inclusive, resilient, and transformative growth. This includes making sustainable and responsible choices on the national development front, leading to a cleaner, greener, and bluer future. In line with this vision, our infrastructure development agenda now needs to have clear mandates on sustainable practices in sourcing, technology usage for monitoring, biodiversity conservation, recycling, etc., and a national infrastructure resilience plan with a focus on adapting existing infrastructure to climate changes.
We expect infrastructure to be at the centre stage of the budget yet again. A clear instrument of action for driving India’s economic growth amid strong headwinds to the global economy.
Subudhi is Global Leader for Infrastructure Practice, BCG (@BCG). He tweets @suresh_subudhi. Tandon is Lead Knowledge Analyst, BCG. Views expressed are personal,
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