Business India ×
  Magazine:
Cover Feature

Published on: Feb. 8, 2021, 1:08 a.m.
Betting big on infra
  • Highway to growth? Photo credit: Sanjay Borade

By Daksesh Parikh. Executive Editor, Business India

The government has taken the bold step of incentivising industries, announcing capex plans for roads, railways, gas pipelines, textile, food processing, power sector and other infrastructure including development of fishing ports. The overall capital expenditure for 2021-22 has been upped to Rs5.54 lakh crore from the expected actual capital expenditure of Rs4.39 crore in 2020-21. States and institutions will also be given funds for building.

The rationale here is that, for becoming a $5-trillion economy, India needs to scale up its manufacturing and become more competitive to become a part of the global supply chain. As part of the earlier announced Atmanirbhar Bharat Mission, the government has identified 13 focus sectors, for which production-linked Incentives (PLI) have been announced. These include textiles, food processing, electronics, telecom, special steel, automobiles, solar photo-voltaic modules and white goods, amongst others, in addition, medical devices, mobile phones and active pharma ingredients (API). For promoting investments in new sectors and making the industries competitive, it has earmarked an outlay of Rs1.97 crore to be spent over a five-year period.

“Any PLI initiative is good and required for attracting investments in the country to make it globally competitive for boosting exports,” says Vivek Bhatia, MD and CEO, Thyssen Krupp Industries India, a part of the Thyssen group. Bhatia, appreciative of the budget, applauds the government for taking a bold decision to pursue growth. For capital goods industries, in particular, he says it is an encouraging budget, moving in the right direction.

However, if the government is really serious about getting foreign investments in new projects, it should also help prospective investors to get steel and power at globally competitive costs. In the case of steel, prices have gone through the roof and power prices are different in various states. “I believe that besides plug-and-play models, the government has to consider a few out-of-the-box initiatives to compete for investments, which also have the option of going to Vietnam, China or Indonesia.”

For textiles, which is one of the largest industries and a big employment generator, the government has launched Mega Investment Textiles Parks (MITRA), which aims to create seven textile parks. This aims to create world-class infrastructure, with plug-and-play facilities, and will be established over a three-year period.

Power transmission

The broad theme across sectors being to build competitiveness, the budget has allowed consumers to choose their distribution companies. It has earmarked Rs3.06 lakh crore for a reforms-based, result-oriented power distribution sector scheme. “This is expected to assist discoms for infrastructure creation tied to financial improvements, including pre-paid smart metering, feeder separation and upgradation of systems,” says Prabhajit Kumar Sarkar, MD & CEO, Power Exchange India. Sarkar also feels that other initiatives like “100 per cent Railway electrification, expansion of metro rail networks and hydrogen energy mission for generating hydrogen out of green-powered sources will contribute significantly in enhancing the country’s power demand.”

In a bid to give further impetus to infrastructure, it has proposed higher outlay of Rs1.18 lakh crore for roads and highway development. Most of it is earmarked for capital expenditure. Economic corridors are being planned in Tamil Nadu, Kerala and West Bengal, along with national highways. Road construction is one of the big employment generators for unskilled and semi-skilled workers. The National Infrastructure Pipeline, a five-year-plan up to 2025, has 7,200 projects, a large number of them being in the road transportation sector..

Similar amount of Rs1.10 lakh crore is being proposed to be utilised for railways, bulk of it being earmarked for capex. Eastern and Western dedicated freight corridors have been envisaged for completion over the next two years. Broad gauge electrification is to be completed by 2023 with 72 per cent being completed by end 2021.

Funding

To ease the funding of mega projects and catalyse new projects, the government also proposes to set up a development finance institution. It envisages the institution to build up an asset size of Rs5 lakh crore in three years, for which it has budgeted an initial capital of Rs20,000 crore. The private sector will also be invited to participate in this, as also other institutions, which could be set up. The rationale for this is that existing banks have neither the requisite appraisal skills required for project funding nor the funds that can sustain long-term duration. The mismatches often lead to NPA problems in the banking sector. Many private banks do not consciously take project risks and limit themselves to safe lending and providing finance for meeting working capital requirement of companies.

In any case, finance may not be the limiting factor for projects envisaged, given that the global markets are awash with liquidity. What will be crucial in becoming a $5 trillion economy is execution prowess. The government is of the view that budget gives a clear direction and lays out the right path.

Don't miss this

Corporate Report

IDBI Bank: Privatisation blues

There is certainly no point in selling the bank at a cheap price when the share prices are at their 52-week lows

Cover Feature

Dalmia Cement: Making a mark

Dalmia Cement with its growing capacity, markets and strong focus on efficiency, is now well placed to emerge a winner

Corporate Report

RMZ: Building spaces of future

RMZ Corp has put in place a hyper-growth strategy

Focus

Another shot at reforms

Should the stalled reforms for India’s farm economy get another push – this time within the government?

Our letter to you, once a week.
Register with The CSR Weekly for free!

E-MAGAZINE
Making a mark
Double Whammy
Commodity boom
FROM THIS ISSUE

Government

Corporate Report

Retailing

Infotech

Education

Hospitality

Social Responsibility

Company Feature

Classrooms go live, thanks to Airtel

Published on April 5, 2022, 11:25 a.m.

Despite the pandemic, Bharti Foundation has ensured that children are not deprived of learning opportunities

Column

Collaborative excellence

Published on April 4, 2022, 8:53 p.m.

A policy perspective for meeting SDG-9 in low resource setting of developing economies

Column

Innovation and infrastructure

Published on April 4, 2022, 8:10 p.m.

India is well-positioned to become a model of corporate sustainability

Column

‘More for less’

Published on April 1, 2022, 10:12 p.m.

The merger of technology and SDGs – A game-changing win of the era

Climate Change

Collaboration

IRENA, Opec ramp up RE transition

Published on June 22, 2022, 2:01 p.m.

Both agree to mobilise finance, unlock investment and support project development

Mobility

A surge in hydrogen vehicles

Published on June 22, 2022, 1:11 p.m.

The consumer market is expected to lead the hydrogen vehicles space

Disasters

Climate migration wreaks havoc

Published on June 22, 2022, 12:51 p.m.

Climate change drives millions out of their homes

Government and Policy

Investors back UP’s green energy push

Published on June 22, 2022, 12:15 p.m.

Investment proposals galore in the state

Stay ahead of the times.
Register with The Climate Change Weekly for free!