By- Sanjay Kumar Sinha
All eyes are on Finance Minister Nirmala Sitharaman’s Union Budget 2024, slated to be unveiled during the third-fourth week of July, as the PM Modi-led NDA government has started its historic third term following a decisive victory in the recently concluded Lok Sabha elections. Budget 2024, marked as the first full-fledged event of Modi 3.0, is eagerly anticipated to set the tone for India’s progression towards the third largest economy of USD 5 trillion in the world and add traction to the nation’s journey of becoming Viksit Bharat by 2047.
In the backdrop of the strong economy with robust fiscal discipline and RBI’s highest dividend of Rs 2.11 lakh crore for fiscal year 2024, the upcoming budget will unveil its pragmatic and prudent stand on key sectors like infrastructure, railways, airports, export-import, tax reforms, technological advancement et al. The focus on capex to execute infrastructure projects faster will, undeniably, add wings to the economy. The investment in infrastructure is deemed vital as its cascading impact encompasses various sectors, generating demands for construction, cement, steel, equipment manufacturing, and other materials as well as job creations.
As capital expenditure (CapEx) is projected to grow at a CAGR of 11% over the next five years, the government is expected to channelize resources to ensure progression of infrastructure construction efficiently. The transportation sector including railways, airports, highways and road construction with sustainability will be at centerstage with public spending of Rs 11.11 lakh crore as outlined in the interim budget by the Finance Minister. The interim budget laid strong foundation for major initiatives to bolster multimodal connectivity under the PM Gati Shakti National Master Plan. Under this ambitious plan, the Central government should offer interest subsidies to states for undertaking infrastructure projects effectively. It will enhance the quick delivery of projects across the nation.
The road and highway sector is expected to attract prime attention. The highway expansion and rural road network will be reinforced with sufficient budget allocation in order to pursue the Modi government agenda for better connectivity. Flagship schemes such as Bharatmala Pariyojana and Pradhan Mantri Gram Sadak Yojana will be in full throttle to expedite projects. A good amount of Rs 2.78 lakh crore with 2.8 percent increase from the preceding year was earmarked for the Ministry of Road Transport and Highway in the February interim budget.
Tellingly, civil engineering work, one of the most important sections within the development of infrastructure, may receive more attention especially in bridge construction in the various cities to help in reducing traffic jams. Additionally, we are hopeful of a reduction in the cost of funding for the implementation of projects under the BOT (Build-Operate-Transfer) system that will enable the private sector to participate in the infrastructure investment.
The modernization and expansion of the Indian Railways is anticipated to be in the fast lane. We could see tangible announcements for expansion and completion of high-speed railway corridors like Vande Bharat and Bullet Trains. The government will walk the talk on its announcement of Rs 2.52 lakh crore budgetary allocation in February, a 5.8 percent hike from the previous fiscal year 2023-24.
Moreover, the government is expected to hold its ground on the progressive momentum of the aviation sector. Sitharaman put focus on the expansion of airports under the UDAN (Ude Desh Ka Aam Nagrik) scheme, enhancing air connectivity to Tier-II and Tier-III cities, and laid emphasis on the record-breaking aircraft orders exceeding 1000 in anticipation of soaring air travelers to 13 million. The government’s significant strides on the development of the aviation infrastructure for the past 10 years have been commendable.
The upcoming Budget 2024 is all set to address the needs of the export-import sector. We could anticipate a potential reform in tax structures and technological advancements, which will boost the competitiveness of Indian products in the global market, bolstering the country’s trade position. Tax exemptions for promoting environment-friendly construction could encourage more infrastructure investments. The budget is expected to align with multi-year plans focused on using technology in infrastructure sustainability. This could be for smart city projects, digitalize infrastructure and AI/ IoT in structure upkeep.
The government has also announced a plan to spend Rs. 15,000 crore for the next three years for the Development Action Plan of the Scheduled Tribes. The investment will be directed towards development of infrastructure for tribal groups to enhance their socio-economic conditions. Due to the existing shortfalls in the target of meeting the priority sector credit needs, there is a proposed establishment of Urban Infrastructure Development Fund (UIDF). The aim of this effort will bridge the infrastructure gaps in the urban societies and enhance the standard of living of citizens.
Although the infrastructure push looks appealing and brings immense opportunities, it is fraught with challenges of managing fiscal prudence, project completion with deadlines and environmental concerns in relation to the development work. The Budget 2024 could reflect emphasis on sustainable infrastructure development. Sustainable urban development, water conservation, and green energy infrastructure are the areas of prioritization for budgetary allocation.
The Union Budget 2024 is going to be a watershed moment for infrastructure development in India. The government’s commitment of its allocation of 3.3 percent of GDP to the infrastructure sector in the fiscal year 2024 will bring a diametric change in transport, road, highways, railways, and logistic segments. Strategic capital expenditure, collaborative approach of the Centre-state governments, and active participation of private players will undoubtedly make a more robust and sustainable infrastructure ecosystem in the country. The expected investments and effective implementations of policies will not only ramp up the economic growth rates but also improve the quality of life for people in the country.
(Sanjay Kumar Sinha, Founder and Managing Director, Chaitanya Projects Consultancy)
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