Investment road map must be clearly spelt out in Budget

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Published: February 24, 2015 12:52:36 PM

The concept of 100 smart cities with R1,000-crore investment for each to provide infrastructural facilities has to be translated into reality. As 80-85% of investment into this is to come from the private sector, the Budget may specify some sops to facilitate the flow of investment.

There is no denying that in the last few months, the subdued pattern of perception on business outlook in the country has moved up. This is primarily due to resolution of some pending decisions concerning FDI limit, opening up of sectors to foreign investment, ordinance route for Land Acquisition Act and MMDR Act, commencement of e-auction for mines allotment, and commitment for GST implementation.

The developments in the external front have brightened the prospects of capital flow from the US, Japan and Korea. The single most concern remains on the investment front in the domestic economy. Barring DFC, Metro rails, industrial corridors, the actual flow of investment in other areas is yet to begin. A look at the projects that have resolved all clearance related issues from R50-1,000 crore shows that a good number of projects belong to steel and mines, power and water resources.

The intervention of the Supreme Court in cancelling all allocations of coal mines since 1993 had played a major role in slowing down the ongoing investment in mines. Thanks to the fast pace adopted by the coal ministry, it is expected that fresh investment in coal mines would see the light of the day from April itself as substantial fees deposited by the prospective owners would prompt them to initiate actions quickly.

The demand for non-coking coal from thermal projects, steel plants and cement units is high. There is an additional advantage of coal blocks allocation. As the whole process would lead to income generation mostly for the states (Odisha, Jharkhand, Chhattisgarh and West Bengal) and partly for the Centre, the volume of investible resources is enhanced. A certain prioritisation of the resources thus earned may be necessary in favour of steel and mining sectors.

The Budget would outline the sectoral investment planned by the government in 2015-16 in a few sectors like irrigation, railways, road and coal, apart from the social sectors. For private and corporate investment to play a bigger role in supplementing the government intervention in sectors like power, communication and ports, it is imperative that overall business scenario in the country becomes significantly positive to allay the apprehensions on return on investment and reduce the risk perception concerning the commercial viability of the projects undertaken.

There remain two other areas that need monitoring. One is the ongoing and prospective investment by the PSUs in oil & gas, steel & mines and power & coal sectors. In all these areas of investment already committed, a judicious mix of investment for capacity augmentation, downstream and warehousing facilities, raw material sourcing, facilities to produce value-added products including technology transfer would be called for.

The other area that needs investment involves real estate market. The average housing shortage of 18.8 million dwelling units for the urban sector and 47.4 million dwelling units for the rural sector pose a serious challenge to builders/ societies/ government agencies/co-operatives to meet the shortfall. The Budget can provide some additional dispensations to attract more buyers for the houses. As a part of urbanisation, the concept of 100 smart cities with R1,000 crore investment for each to provide infrastructural facilities has to be translated into reality. As 80-85% of investment of this is to come from the private sector, the Budget may specify some sops to facilitate the flow of investment.

If the fundamental strength of fixed capital investment in pulling up the base of the economy is realised and appreciated in the interest of employment, income and productivity, the road map for investment in various segments of the industry must be clearly spelt out in the Budget. Missing the bus this time would be very costly.

The author is DG, Institute of Steel Growth and Development. Views expressed are personal.

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