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Spending on infrastructure to increase; delivery still doubtful

Spending on infrastructure to increase; delivery still doubtful
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First Published: Tue, Jul 07 2009. 12 30 AM IST

Right track: Finance minister Pranab Mukherjee intends to step up infrastructure spending to 9% of GDP by 2014. Harikrishna Katragadda / Mint
Right track: Finance minister Pranab Mukherjee intends to step up infrastructure spending to 9% of GDP by 2014. Harikrishna Katragadda / Mint
Updated: Mon, Jul 13 2009. 04 22 PM IST
New Delhi: The government on Monday proposed spending significantly higher amounts to build urban and rural infrastructure in its Budget for 2009-10.
It has also reinforced its intention of getting banks and the private sector to fund large infrastructure projects so it can focus on the social sector.
Right track: Finance minister Pranab Mukherjee intends to step up infrastructure spending to 9% of GDP by 2014. Harikrishna Katragadda / Mint
The Budget stepped up by 45% allocation to Bharat Nirman, the United Progressive Alliance government’s flagship plan to build rural infrastructure. Outlays for rural housing, roads, electrification and irrigation have been raised by 63%, 57%, 27% and 75%, respectively, over the allocations made in the budget estimates for 2008-09.
The Budget also proposed to spend Rs12,887 crore to build urban infrastructure, an increase of 87% over the previous year, in spite of concerns over completion of projects sanctioned under the scheme.
Finance minister Pranab Mukherjee told Parliament that he intended to step up infrastructure spending to 9% of the gross domestic product by 2014, but didn’t address questions of delivery and implementation of these schemes, many of which suffer from poor execution.
The Budget also proposed a more modest 23% increase in allocation for the National Highways Authority of India. This is a clear signal that the government intends to stick to toll-based highway projects involving private firms wherever possible, a highway authority official said on condition of anonymity.
The Budget continued India’s policy of making state-owned infrastructure financier, India Infrastructure Finance Co. Ltd (IIFCL), the nodal body for financing large infrastructure projects.
IIFCL will be allowed to buy out infrastructure loans from banks, allowing the latter to provide more loans. IIFCL earlier this year was given permission to issue Rs10,000 crore in tax-free bonds, which it would use to refinance infrastructure project loans made by banks.
IIFCL chairman S. S. Kohli said the company would announce details of the scheme in two months.
Infrastructure developers also stand to benefit, with duties on prefabricated concrete slabs and blocks used in construction being removed.
Analysts welcomed the increased focus on infrastructure but said the government should have announced means of plugging a patchy implementation record, without which increasing the flow of money was meaningless.
“While there has been huge talk of infrastructure and PPP (public- private partnership), there has been no movement. Outlays for all existing schemes have increased, but we were looking for anything on delivery,” said Vinayak Chatterjee, chairman and founder of project management consultancy Feedback Ventures Pvt. Ltd. “The fact that there was not even a whisper on delivery makes this a carry-on-as-usual Budget.”
“The Budget focuses on more inclusive growth, though at the cost of fiscal consolidation,” said Neeraj Swaroop, regional chief executive, India and South Asia, Standard Chartered Bank.
rahul.c@livemint.com
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First Published: Tue, Jul 07 2009. 12 30 AM IST