Getting to core of infra spending

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: The growing deficits and the tussle for scarce resources have in no ways restrained the finance minister’s enthusiasm from boosting the infrastructure sector. Total Budget allocations for important infrastructure ministries such as civil aviation, telecom, shipping, road transport, railways and related areas like drinking water and urban development went up to Rs 61,099 crore, up from Rs 48,866 crore in the previous year. This will boost Budget allocations for the ministries by 25% in 2009-10 much higher than 17.3% in 2008-09. Overall the trends show that total Budget allocation for infrastructure ministries which went down from 5.8% of the total Budget expenditure in 2007-08 to 5.4% in 2008-09 will now go up to 6% in 2009-10.

One should, however, bear in mind that apart from this important ministries the Budget also allocates other funds for infrastructure through other ministries like that of rural development ministry, which sets aside large funds for rural roads and drinking water supply. And apart from direct spending infrastructure will also get a boost through some of the indirect measures announced in the Budget. For instance in the current Budget the finance minister has ensured a sharp increase in institutional funding by asking IIFCL to evolve a takeout financing scheme in consultation with banks to ensure greater funds to the infrastructure sector. The proposal is to make IIFCL refinance 60% of commercial bank loans for PPP projects in critical infrastructure projects.

Other important announcements in the Budget would include the increase in the allocation for the National Highways Authority of India (NHAI) for the National Highway Development Programme (NHDP) from Rs 11,051 crore to Rs 13,646 crore and the Rs 12,887 crore allocated for the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The stepping up of spending on the Pradhan Mantri Gram Sadak Yojana (PMGSY) up by 59% to Rs 12,000 crore was also another important intervention.

Though these major projects received substantial funds from the Union Budget there was wide variation both in the size of spending in the various infrastructure ministries and their increase. The highest Budget allocation in the infrastructure sector was for ministry of road transport which got about a third of the Budget allocated for the main infrastructure ministries. And the prospects of the sector have indeed got a boost with the allocation of the ministry increasing by 21.9% as against the 8.1% growth in the previous year.