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Business News/ Budget / News/  Centre sets course on road to bolster infra spending
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Centre sets course on road to bolster infra spending

Next fiscal’s capital expenditure plan includes ₹1 trillion worth of loans to assist states in catalyzing investments

India has decided to manufacture 400 new, energy-efficient Vande Bharat trains over the next three years. AFPPremium
India has decided to manufacture 400 new, energy-efficient Vande Bharat trains over the next three years. AFP

NEW DELHI : Infrastructure development will be the key theme for the government as it proposed a robust increase in capital expenditure for the next fiscal, seeking to revive the economy ravaged by the coronavirus outbreak.

In the Union budget for 2022-23, finance minister Nirmala Sitharaman has pegged capital expenditure at 7.5 trillion, 24.4% more than the revised estimate of 6.03 trillion for this fiscal. The figure is also 35.4% higher than this year’s budget estimate of 5.54 trillion. This year’s revised estimate includes a capital infusion of about 52,000 crore into Air India.

Next fiscal’s capital expenditure plan includes 1 trillion worth of loans to assist states in catalyzing investments. These 50-year interest-free loans will be over and above the normal borrowings allowed to states.

Sitharaman said the capex was 2.2 times of the amount spent during 2019-20 before the pandemic.

Observing that capital investment is key to speedy and sustained economic revival and consolidation through its multiplier effect, she said the government needs to maintain the level of capital investments to make up for the setback due to the first wave of the pandemic in FY21.

The minister said capital investment also help to create jobs, boost demand for manufactured inputs from large industries and MSMEs, services from professionals, and help farmers through better agri-infrastructure.

“With this investment taken together with the provision made for creation of capital assets through grants-in-aid to states, the ‘effective capital expenditure’ of the central government is estimated at 10.68 trillion in 2022-23, which will be about 4.1% of GDP," Sitharaman said.

With the economy hit hard by the pandemic, the government has pushed the throttle on capital expenditure front, trying to reinvigorate infrastructure development and economic growth. In this fiscal budget, Sitharaman raised the capex by a record 26% at 5.54 trillion, compared with revised estimates of 4.39 trillion in covid-hit fiscal 2021.

The government has carried on the strong focus on infrastructure development in the latest budget as well. On the ambitious PM Gati Shakti initiative, Sitharaman said the National Master Plan under Gati Shakti will encompass economic transformation, seamless multimodal connectivity and logistics efficiency. It will also include infrastructure developed by state governments as per the Gati Shakti Master Plan. The focus will be on planning, financing including through innovative ways, use of technology, and speedier implementation.

A PM Gati Shakti Master Plan for expressways will be formulated in 2022-23 to facilitate faster movement of people and goods. The national highways network will be expanded by 25,000km in 2022-23. The government will mobilize 20,000 crore through innovative ways of financing to complement the public resources.

Samir Kanabar, tax partner for infrastructure with EY India said: “Infrastructure gains momentum as theory of big push gets into play. The key pillars of infrastructure i.e. NIP, NMP and PM GatiShakti have been fuelled with energy to propel economic growth with an array of announcements relating to roads, railways, power, etc which are indicative of expansionist mindset and sustainable development."

Further, the 1 trillion worth of loans to be given to states will be utilized by the states for PM Gati Shakti related and other productive capital investment, including supplemental funding for priority segments of PM Gram Sadak Yojana, digitization of the economy, among others. The finance minister announced that contracts for implementation of multimodal logistics parks at four locations through public private partnership (PPP) mode will be awarded in 2022-23.

As part of the Atmanirbhar Bharat initiative, 2,000 km of railway network will be brought under ‘Kavach’, an indigenous technology for safety and capacity augmentation in 2022-23. Four hundred new-generation Vande Bharat trains with better energy efficiency and passenger riding experience will be manufactured in the next three years.

The budget also announced plans to develop 100 PM Gati Shakti cargo terminals for multimodal logistics facilities in the next three years.

The government will also start the ‘Parvatmala: National Ropeways Development Programme’.

“As a preferred ecologically sustainable alternative to conventional roads in difficult hilly areas, National Ropeways Development Programme will be taken up on PPP mode. The aim is to improve connectivity and convenience for commuters, besides promoting tourism. This may also cover congested urban areas, where conventional mass transit system is not feasible," Sitharaman said. Contracts for eight ropeway projects for a length of 60 km will be awarded next fiscal.

Under a plan to provide tap water to households, ‘HarGhar, Nal Se Jal’, the government has allocated 60,000 crore with an aim to cover 38 million more households in FY23. The current coverage under the scheme is 87 million of which 55 million households were provided tap water in the last two years itself.

Further, in 2022-23, 8 million homes will be completed for the identified eligible beneficiaries of PM Awas Yojana with an allocation of 48,000 crore. Sitharaman said the Centre will work with state governments to shorten the time required for land and construction related approvals to promote affordable housing for middle class and economically weaker sections in urban areas.

“We shall also work with the financial sector regulators to expand access to capital along with reduction in cost of intermediation," she said.

The minister also announced a new scheme, Prime Minister’s Development Initiative for North-East, PM-DevINE, to be implemented through the North-Eastern Council. It will fund infrastructure, in the spirit of PM GatiShakti, and social development projects based on felt needs of the North-East. An initial allocation of 1,500 crore will be made.

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Rituraj Baruah
Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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Published: 02 Feb 2022, 01:14 AM IST
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