Union Budget 2018: Arun Jaitley Gives Infrastructure a Push

The IMF is the latest global financial institution to predict positive GDP for India in 2018.

(Photo: Reuters)

India increased allocation to infrastructure by more than Rs 1 lakh crore for financial year 2018-19, as the government looks to aid the economic recovery after the twin shocks of demonetisation and the goods and services tax (GST).

Total expenditure on infrastructure for the next fiscal will stand at Rs 5.97 lakh crore compared to the Rs 4.94 lakh crore revised estimate for 2017-18, Finance Minister Arun Jaitley said in his speech on Thursday, 1 February.

Allocations for key infrastructure schemes are:

• The total capital and development expenditure for the Railways has been pegged at Rs 1.48 lakh crore compared to Rs 1.31 lakh crore last year. This includes Rs 93,440 crore provided by the government.
• Allocation for the road sector has been increased to Rs 70,544 crore compared to Rs 60,671 crore in 2017-18.
• For the transportation sector as a whole, including rail, roads and shipping, the government has provided Rs 1.34 lakh crore compared to Rs 2.4 lakh crore in 2017-18.
• Rs 40,000 crore will be spent on upgrading the Mumbai railway system.
• There is also a plan to establish a Rs 160-kilometre rail line in Bengaluru, for which Rs 17,000 crore has been allocated.

“The investment earmarked for infrastructure reaffirms continued funding of various initiatives in roads, railways and urban infrastructure. Quantum leap in airport capacity is a key requirement to keep pace with the rapid growth in aviation,” said Manish Agarwal, partner and leader, infrastructure, PricewaterhouseCoopers India.

Other initiatives, outside the budget, to revive private sector play in these sectors will complement and further the impact of the budget allocations.

Manish Agarwal, partner and leader, infrastructure, PricewaterhouseCoopers India

The increased outlays come when the economy is expected to grow by 6.75 percent in the current financial year and 7-7.5 percent in the next, according to the Economic Survey released ahead of the Budget.

In the last two years, growth was driven mostly by private consumption and government spending. There are, however, early signs of a pick-up in private investment with gross fixed capital formation seen rising by 4.5 percent this year.

Still, investment as a percent of GDP remains weak. According to the economic survey, this remains at below 27 percent. By pushing spending on infrastructure, the government hopes to continue supporting the investment cycle till private investment revives further.

Jaitley, in his Budget speech, said the National Highway Authority of India will organise all road assets into a special purpose vehicle. Also, the government is moving towards electrification of railway networks with the target set at 4,000 kilometres by the end of the next financial year. Track maintenance and railway safety are the other two key issues being looked into, he said.

(This article was originally published in BloombergQuint)