Despite the twin balance sheet problem, poorly structured contracts and weak project preparation, infrastructure investment in the country rose from Rs 23.8 lakh crore between FY07-12 to Rs 37.2 lakh crore between FY13-17.
Despite the twin balance sheet problem, poorly structured contracts and weak project preparation, infrastructure investment in the country rose from Rs 23.8 lakh crore between FY07-12 to Rs 37.2 lakh crore between FY13-17. In the last two financial years, higher central spending had offset the fall in private investments. A Crisil report shows five sectors—power, roads, telecom, irrigation and railways—accounted for 83% of all such investments in the past decade. While states have matched Centre on spending, their strained finances are a cause of concern now. Between FY08 and FY12, states increased spending on infrastructure to over 92% of what the Centre had spent. In the previous five fiscals, spending by states was 80% of the Centre’s. This was because of higher direct devolution and rationalisation of Central government schemes.
Crisil estimates that spending on infrastructure needs to increase to Rs 50 lakh crore for the next five years through 2022. This projection is based on an annual average GDP growth of 7%, infrastructure investment of around 5.5% of GDP and a pick-up in private sector investments. Going forward, power, transport and urban sector will account for 78% of the overall infrastructure spending.
Apart from early resolution of the stressed assets problem, the Centre should expedite National Investment and Infrastructure Fund as a sovereign platform to attract long-term capital and create a well-capitalised bond guarantee fund to spur the corporate bond market. States should issue municipal bonds to raise funds.