Budget 2018: With a whopping 50% increase from the last Budgetary allocation and a 20% hike from the revised estimate, the infrastructure sector continued to remain one of the thrust areas for the Narendra Modi government in the Union Budget 2018 as well — out of spotlight, though, due to a slew of announcements for farmers, the poor and the rural population. Capital outlay towards the infrastructure sector up to Rs. 5.97 lakh crore from 3.96 lakh crore budgeted last year, which was later revised to Rs 4.94 lakh crore. And there was a clear winner: The Railways.
Last year, the Railway Budget was merged with the general budget. The government, in Budget 2018, made an all-time high allocation to the sector, while in case of roads and highways, there was no major booster. India’s long journey lifeline Railways received an allocation of Rs 1.49 lakh crore, up from previous fiscal year’s Rs 1.31 lakh crore, while the total budgetary allocation for the road sector was raised by 6.7% to Rs 89,544 crore from Rs 83,900 crore in the previous year.
The explaination for choosing Railways over roads can be found in Arun Jaitley’s address at FICCI’s AGM last month in which he said that government was satisfied with the development of highways and ports, but the railway sector needed the boost. From the proposed bullet train to the quality of trains, he said, need strengthening. Both ICRA and CRISIL said that the impact of higher allocation to the Railways was a positive move.
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The increase of 22% in FY2018 is in line with expectations, and will be required to meet the Railways Vision 2022. The Budget has also emphasised on setting higher execution targets with commissioning of 4,100 km of railway lines in FY2019 compared to 3,500 km during FY2018BE. The Budget continued to emphasise on electrification of Railways by sharply increasing electrification projects capex (up by 82.6%) and target (up by 50%), CRISIL said.
In addition, the Budget also highlighted the redevelopment of 600 railways stations, which is being undertaken by Indian Railway Station Development Co. Ltd. Other major announcements in the Budget include initiation of suburban rail network projects in Mumbai and Bengaluru with an estimated project cost of Rs. 68,000 crore.
The total budgetary allocations including the performance-based funding (PBFF), the Central Road Fund (CRF) and GBS to fund the ambitious new highway-development programme (including Bharatmala) is estimated at Rs 3,43,045 crore over FY2019-FY2022. Therefore, starting this budget, the allocations to the Road Ministry was expected to increase substantially.
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However, the budgetary allocation (excluding PMGSY) was raised 8.7% to Rs 70,544 crore from Rs. 64,900 crore in the previous year. A major part of the Bharatmala is expected to be undertaken through NHAI. To bridge the shortfall in budgetary allocation, the NHAI is expected to raise funds by monetising more assets through toll-operate transfer and Infrastructure Investment Trust routes (by transferring mature assets to SPVs).
According to a statement by the Finance Ministry, an investment in excess of Rs 50 lakh crore is needed to increase the growth of the GDP and to connect the nation with a network of roads, airports, railways, ports and inland waterways. “As expected, Budget 2018-19 continues to focus on infrastructure development through schemes like UDAN, AMRUT, Smart Cities Mission etc. in addition to focussing on the rural and agriculture sector,” Arindam Guha, Deloitte India Partner said.
Besides, roads and the Railways, the outlay for the Housing and Urban Development increased sharply by 57% with the increased amount coming from higher expenditure under the Pradhan Mantri Awas Yojana (Urban). Allocation for the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) increased by 27.5% to Rs. 9,429 crore, ICRA said.
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Under this, Rs. 6,000 crore is to be spent on 48 irrigation projects under the Accelerated Irrigation Benefits Programme (AIBP) and command area development Government along with the regulators to promote investments in bonds with the credit rating of A and above from the current rating threshold of AA and above. An investment of Rs 14.34 lakh crore on rural infrastructure through Budgetary and non-Budgetary allocation was also announced.