The Budget did give out a positive statement. It lacks a clear road map as to how to achieve certain targets proposed.

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Infrastructure is one of the major focus areas of the Union government in the Budget presented by Finance Minister Nirmala Sitharaman. An investment of Rs 100 lakh-crore over the next five years was announced in this domain and the minister also stressed on the importance of investment-driven growth in infrastructure.

The Budget indicates that India’s physical connectivity shall be extended through schemes such as the Pradhan Mantri Gram Sadak Yojana, industrial corridors, dedicated freight corridors, Bharatmala and Sagarmala projects, Jal Marg Vikas and UDAN. Under the Pradhan Mantri Gram Sadak Yojana there has been no change in the budget allocated compared to the previous year. However, there has been a significant underutilisation of fund considering the budget allocated for the year 2018-19, for which the estimate was Rs 19,000 crore and the revised estimate was Rs 15,500 crore.

A considerable investment of Rs 550 crore is proposed for the Sagarmala project, but this remains less than what was allotted in the year 2018–19 (Rs 600 crore), and only 63 per cent of the previously estimated budget was utilised. The project has experienced budgetary restrictions in the previous years due to its enormity of the scale of operation, but this has not been addressed adequately in this Budget.

A comprehensive restructuring of the National Highway Programme is envisaged to ensure that a National Highway Grid is created. In the second phase of the Bharatmala scheme, states will also get support to develop state road network. Such an integrated development proposed in the Budget gives out a positive message, but there is no mention of its finer details. The rural-urban divide will get diminished further by the ongoing UDAN scheme, which will provide air connectivity to smaller cities.

The Budget speech also mentioned the need for an investment to the tune of Rs 50 lakh-crore for the railway infrastructure for 2018–2030. The overall budgetary support to the schemes of ministry of railways has increased from Rs 55,088 crore (budget estimated in 2018–19) to Rs 68,019 crore this year. Considering the capital expenditure outlays of the railways, the Budget has proposed to encourage public private partnership (PPP) for speedier development in this sector. The total operational length of metro rail in India has increased to 657 Km. An estimated budget of Rs 17,714 crore is proposed for the same this year. Along with it, PPP initiatives are encouraged to expand the metro rail network.

As mentioned in the BJP’s manifesto, priority has been given to sustainable development promoting electric vehicles. The government had earlier lowered the GST rate on electric vehicles from 12 per cent to 5 per cent. In addition to this, the government has proposed an income tax deduction of Rs 1.5 lakh on loans taken to purchase electric vehicles. These including other benefits provided by the government, such as less regulatory barriers in procuring e-vehicles, shall lead to an increase in the number of private vehicles on the road, which may also increase the pressure on other infrastructures.

The Pradhan Mantri Awas Yojana (urban) has seen a significant progress with 81 lakh houses sanctioned, 47 lakh houses under construction and 24 lakh houses delivered to beneficiaries. Land parcels owned by central ministries and central public sector enterprises across India shall be utilised to build large public infrastructure, such as affordable housing, through instruments such as joint development and concession. Tax holiday which was provided on the profits earned by the developer of affordable housing shall continue.

For purchasing affordable housing, a total enhanced interest deduction of up to Rs 3.5 lakh can be availed. This is including the additional deduction of Rs 1.5 lakh proposed in the Budget, but this can be availed only on loans borrowed up to March 31, 2020. This raises questions on the efficiency of the introduced amendment as its success will depend on the number of beneficiaries availing it within three quarters and the effective machinery response.

The Urban Rejuvenation Missions, which included the flagship initiative of the previous Modi government, the Smart Cities Mission, was not a major highlight in the Budget speech. The allocated budget for the Smart Cities Mission and AMRUT together is Rs 13,750 crore. Almost 97 per cent of the fund allocated to these schemes has been utilised, but there has been only 9 per cent increase in the fund allocated this year.

As it is reflected in the Budget document, the tax buoyancy is at a moderate level and demands a higher private participation. Though PPPs have been proposed to finance many of the schemes and projects, there is a lack of clear guideline on how to achieve it.

On the whole, Sitharaman’s Budget seemed more like a vision statement. Though it did give out a positive statement, it lacks a clear road map as to how to achieve certain targets proposed. Majority of the schemes and projects mentioned in the infrastructure sector appeared a continuum of what the government has been doing or which were mentioned in the BJP’s election manifesto.

This article was published in Money Control click to read

Views expressed by the authors are personal and need not reflect or represent the views of Centre for Public Policy Research. 

Praseeda Mukundan
Praseeda Mukundan
Praseeda Mukundan is a Senior Research Associate at CPPR. She is an Architect, and Urban and Regional Planner from the School of Planning and Architecture, Bhopal. She can be contacted by email at praseeda@cppr.in