India commits 100 lakh crore to infrastructure in new budget

The Indian government presented the Union Budget for 2019-20 earlier this month, and had a clear focus on improving infrastructure and overall ease of living.

The presentation, which began by stating India’s economy is now the sixth largest in the world (up from 11th five years ago), stated that it expected the economy to reach USD 3 trillion by the end of the financial year and wants to reach a USD 5 trillion economy by 2025. 

There was a primary focus on rural development and the funding of infrastructure construction and maintenance: a massive INR 100 lakh crores (1.5 trillion USD) over the next 5 years has been committed to the improval of the infrastructure sector. Most notably, these improvements include: 

Railways - According to government estimates, railway infrastructure needs an investment of INR 50 lakh crores before 2030. Given that the expenditure is around INR 1.5 lakh crores per annum it is, according to the presentation, necessary to encourage Purchasing Power Parity and privatise the sector. 

Connectivity - Projects such as the Bharatmala Pariyojana and the Sagarmala programme, which have been set up to enhance road connectivity and waterway connectivity respectively are being funded by the budget to help bridge the rift between the urban and rural parts of the country. 

Roads - The budget has allocated INR 80,250 crore towards upgrading over 100,000km of road length. Further money has been allocated to funding the Pradhan Mantri Gram Sadak Yojana (PMGSY) - a scheme introduced in 2000 tasked with providing weather resilient road connectivity to unconnected villages. 

However, since current Prime Minister Narendra Modi’s appointment, experts have aroused the suspicion that its estimated projection may not be entirely accurate.

According to Bloomberg, this budget proposal for the next five years is unrealistic. A report from Arvind Subramanian, former Chief Economic Adviser to the Government of India, said that the GDP statistics cited by the budget report seem too good to be true - even if 55% of the 100 lakh crore budget is funded by public resources, “the sorry state of corporate balance sheets” make it doubtful whether the private sector can put up its 45% share. 

Having said this, the idea of the budget is widely considered to be satisfyingly progressive - huge spending in infrastructure is being met alongside the easing of living and doing business within the country. CBRE stated that these plans to significantly fund job growth and education could potentially completely transform India into a world leader in human capital - considering the fact that 9 million people are added to the Indian workforce each year. 

For further discussion on Indian infrastructure, Infra India GRI 2020 takes place on 19-20 February in New Delhi.

Article by Matt Harris