Active Stocks
Thu Mar 28 2024 15:09:27
  1. Tata Steel share price
  2. 155.50 1.73%
  1. ICICI Bank share price
  2. 1,091.10 0.65%
  1. HDFC Bank share price
  2. 1,446.75 0.42%
  1. ITC share price
  2. 427.40 -0.14%
  1. Power Grid Corporation Of India share price
  2. 276.00 1.83%
Business News/ News / India/  Covid-19 to slow down projects under 111 trillion national infra pipeline
BackBack

Covid-19 to slow down projects under ₹111 trillion national infra pipeline

The government’s priority will be to fight the pandemic and the disruption it has caused. Given the fiscal constraints, investment in infrastructure may get pushed back, particularly by states

Infra spending may take a backseat in the near term as the government focuses on the fight against covid-19.Premium
Infra spending may take a backseat in the near term as the government focuses on the fight against covid-19.

MUMBAI: The Centre's plan of a massive increase in investment, targeted at 111 lakh crore, under the National Infrastructure Pipeline (NIP) during FY2020-25 is likely to face severe near-term headwinds due to the covid-19 pandemic.

While the NIP looked ambitious and challenging even before the pandemic struck, it seemed achievable with the government's significant push for infrastructure.

Credit ratings agency Icra said the pandemic has now made it a daunting task to achieve the target. The government’s priority will be to fight the pandemic and the disruption it has caused. Given the fiscal constraints, investment in infrastructure may get pushed back, particularly by state governments. Private sector will also likely be deferred or scaled down in the current environment.

"In the current environment, the infrastructure investment in FY2021 will fall short of the plan, and consequently to achieve the NIP target a significant step-up of investments will be required in the later part of the plan," Shubham Jain, senior vice-president and group-head, Corporate Ratings, Icra, said in the note. “Against the total infrastructure investment of 36 lakh crore envisaged in the first two years of NIP (FY2020-FY2021), the actual investment is likely to range between 24-27 lakh crore. Consequently, to achieve the targeted investments in the remaining four years (FY2022-FY2025), an average annual investment of over 21 lakh crore will be required."

Total infrastructure investment in India, during FY2013-19, stood at 57 lakh crore. Compared with this, the NIP investment of over 111 lakh crore is higher by 109%. About 39% of the projects will be implemented by the Centre, 40% by the state governments, and the balance 21% by the private sector. The NIP envisaged a significant scale-up of investments FY21 onwards, with an investment of 21.5 lakh crore in FY2021 compared with 10 lakh crore of investments made in FY2019.

About 42-46% of the pipeline is expected to be financed through the Centre’s and the state’s budget; 29-35% through debt raised from banks/infra NBFCs/bond markets, and 7-15% from private developers’ equity, external aid from multilateral and bilateral agencies and internal accruals of PSUs, etc. There is a financing gap of 15-17% estimated, of which 6-8% is estimated to be bridged by asset monetisation and new development finance institutions (DFIs). The source of funding for the balance 10% remains uncertain as of now.

Among the identified sources of financing for NIP, the state’s budgetary capital outlay is likely to remain lower than projected in the near-to-medium term as spending on social and healthcare is likely to take precedence over infrastructure capex. Credit availability, which has been challenging for the infrastructure sector, is likely to be another area where the growth could be lower than projected. These factors could lead to a wider financing gap than envisaged.

"To bridge the infrastructure financing deficit, leveraging the Central Road and Infrastructure Fund (CRIF), the National Investment and Infrastructure Fund (NIIF), and the Infrastructure Investment Trust (InvITs) could support to some extent," Jain said. “The CRIF is a significant source of funds with an annual cash flow stream of 1.2 lakh crore, and efficient channelising of the same could provide a large financing source. NIIF has seen healthy interest from long-term investors and can help in mobilising significant equity for the infrastructure sector. Similarly, InvITs have shown the potential of channelising long-term capital (like pension and insurance fund) into the infrastructure sector."

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 19 Jun 2020, 04:43 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App