Union Budget 2021: Infrastructure clearly the focus area in the Budget

February 9, 2021 5:00 AM

The Budget has given much-needed impetus to infrastructure development which could reduce trade and transaction costs and improve factor productivity. Moreover, the focus on roads and railways will create a unified market in India for seamless movement of goods and human resources.

In a developing and infrastructure-deficient country like India, public investment in infrastructure, which is labour-intensive, crowds in private investment and is the best way to give a boost to demand.In a developing and infrastructure-deficient country like India, public investment in infrastructure, which is labour-intensive, crowds in private investment and is the best way to give a boost to demand.

By Geethanjali Nataraj
This year’s Budget has almost lived up to the expectations, both in content (allocation) and character (reforms), albeit with too much stretching of the fiscal space. This time the government has allocated 34.5% more (BE to BE) than last year to infrastructure development, and given equal emphasis to all physical infrastructure including roads and highways, railways, urban infrastructure, power, port, shipping and airways, and petroleum and natural gas.

The government has allocated Rs 20,000 crore to set up and capitalise a Development Financial Institution (DFI)—to act as a provider, enabler and catalyst for infrastructure financing and a Rs 5 lakh crore lending portfolio will be created under the proposed DFI in three years. The Budget has allocated Rs 1,18,101 crore, the highest ever outlay, for Ministry of Road Transport and Highways, of which Rs 1,08,230 crore is for capital expenditure. Under the Bharatmala Pariyojana, with an estimated investment of Rs 5.35 lakh crore, already 13,000 km of roads worth Rs 3.3 lakh crore have been awarded for construction. A large amount of money has been earmarked for ongoing and new economic corridors/expressways, and Rs 1,10,055 crore have been allocated to the Railways, of which Rs 1,07,100 crore is for capital expenditure with a promise to complete 100% electrification of broad gauge routes by December 2023.

The Budget has given much-needed impetus to infrastructure development which could reduce trade and transaction costs and improve factor productivity. Moreover, the focus on roads and railways will create a unified market in India for seamless movement of goods and human resources.

Following the example of Delhi where the metro rail has become the lifeline of the people, the Budget has given emphasis to the development of metro rails in the PPP mode in different parts of the country. It mentioned that a total of 702 km of conventional metro is operational and another 1,016 km of metro and RRTS are under construction in 27 cities.

Metro Lite and Metro Neo technologies are being adapted to provide metro rail systems at much lesser cost with similar experience in tier-2 cities and peripheral areas of tier-1 cities. The port infrastructure has been given a boost with the Budget promising Rs 2,000 crore worth seven projects to be offered in PPP mode in FY22 for operation of major ports.

In a developing and infrastructure-deficient country like India, public investment in infrastructure, which is labour-intensive, crowds in private investment and is the best way to give a boost to demand. Overall, the infrastructure sector is the winner in this year’s Budget. However, its success lies in its effective implementation and focusing on projects with quick turnaround time.

The author is director (Policy & Research), Services Export Promotion Council, New Delhi

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