Budget 2023-24: Continued focus on infra to enable growth, create jobs & enhance quality of life

• For attaining over 6% GDP growth, a public investment led budget was needed this year.
  
  
• This budget focuses on increased spending in infrastructure, which is likely to have a multiplier effect.
  
  
• The budget also announced multiple forward-looking initiatives for improving the infrastructure sector.
  

India intends to be a 5 trillion-dollar economy in the next few years. Infrastructure is one of the key catalysts for achieving this objective. Government of India launched the National Infrastructure Pipeline for the period FY 20–25 for supporting development of road, airport, port, urban, electricity, railways, among others.

Given the importance of infrastructure sector, in budget FY21–22 Government of India announced multiple initiatives including creation of a new Development Finance Institution for extending long tenure debt financing at reasonable rates and announced potential projects for monetization through a National Monetization Pipeline besides increasing capital expenditure (Source: Budget FY2021–22).

In Budget 2022–23, initiatives to further strengthen the infrastructure sector were undertaken including significant increase in infrastructure capital expenditure, new infrastructure development programmes, formation of a high-level committee for urban planning among others (Source: Budget FY2022–23).

Continuing with the focus of creating world-class infrastructure, the current Budget has allocated substantial funds for capital expenditure for developing infrastructure. The Government has committed an outlay of ₹10 lakh crore during 2023-24 towards infrastructure capital expenditure compared to ₹7.5 lakh crore (BE) during 2022–23, which is a 33% year-on-year increase.

The overall effective capital expenditure of the Government is estimated at ₹13.7 lakh crore for 2023–24 considering the additional grant in aid earmarked for capital asset creation for states. Given such high budgetary provisions, it is clear that infrastructure spending remains a key lever for the Government of India to enable overall GDP growth.

Multiple initiatives have been declared for developing infrastructure in the current Budget including:

• ₹2.4 lakh crore capital outlay for railways
  
• ₹75,000 crore (including ₹15,000 from private sector) for creating 100 critical transport infrastructure for improving first and last mile connectivity for ports, coal, steel, fertilizer and food grain sectors
  
• 50 additional airports, heliports, water aerodromes and advance landing grounds for improving regional connectivity,
  
• 100% mechanical desludging of septic tanks and sewers in all cities and towns focusing on scientific wet and dry waste management
  
• ₹79,000 crore outlay on PM Awas Yojana, 66% higher than previous year
  

The budget also announced multiple forward-looking initiatives for improving the infrastructure sector. For ensuring more private sector investments in infrastructure like roads, railways, urban infrastructure and power, support will be provided by the newly established Infrastructure Finance Secretariat.

Focus will be provided to transform our cities to sustainable cities by encouraging states and cities to undertake urban reforms. Cities will be incentivized to improve their creditworthiness – emphasis will be on property tax governance and ring-fencing user charges. An Urban Infrastructure Development Fund (UIDF) will be created and managed by National Housing Bank, which will enable creation of infrastructure in Tier 2 and 3 cities by supporting viability gap funding, enabling creation of more bankable projects, enhancing access to external funding, among others.

Further, fifty-year interest free loans for capital expenditure within 2023-24 may be availed by the states, which will enable the states allocate funds in areas like urban planning and reforms, fiscal reforms in urban local bodies, capital expenditure (states share), among others.

To complement the physical infrastructure spending, multiple initiatives for augmenting digital infrastructure have also been announced in the budget. Examples include the National Data Governance Policy which will enable innovation in areas like road sector management, urban service delivery, urban safety & security management, infrastructure management, among others. Open data will also enable evidence-based policy formulation in the infrastructure sector.

The three Centres of Excellence for Artificial Intelligence will enable development of solutions for creating sustainable cities. One hundred labs for developing applications using 5G services will enable creation of digital solutions in areas like intelligent transport management, urban water management, solid waste management, among others.

The budget also focusses on green growth, including initiatives for greening of infrastructure. A Green Credit Programme is proposed to be notified for incentivizing undertaking environmentally sustainable activities by various stakeholders including local bodies. Galvanizing Organic Bio-Agro Resources dhan (GOBARdhan) scheme intends to create 500 new “Waste to Wealth” plants for promoting a circular economy. Investment of ₹20,700 crore including ₹8,300 crore central support has been allocated for construction of inter-state transmission system for grid integration and evacuation of 13 GW renewable energy from Ladakh.

Overall, for attaining over 6% GDP growth, a public investment led budget was needed this year. This budget focuses on increased spending in infrastructure, which is likely to have a multiplier effect by increasing demand generation, creating more employment as well as enhancing the quality of life of citizens.

(The author is a Partner at Deloitte Touche Tohmatsu Indian LLP)