Budget 2019 - Infrastructure

Why is the infrastructure sector important?

1. The infrastructure sector includes power, bridges, dams, roads and urban infrastructure.

2. Infrastructure is one of the major drivers of our economy. More investment in infrastructure translates into more growth and productivity. It also generates better physical and digital access and many future opportunities.

3. International quality infrastructure will help in movement of goods efficiently, necessary to compete in the globalized economy.

4. It is essential to achieve any development agenda as it links producers to markets, workers to jobs, students to schools, and the Sick to hospitals.

5. The infrastructure sector employs 44 million people and contributes 9% to India's GDP.

Which are the measures taken by the government? 

1. In 2018-19 the government's outlay for infrastructure jumped to 6 lakh crore, an increase of over 20% than the previous year. Railways received the highest ever budgetary allocation.

2. An impetus was given to infrastructure through schemes like Sahaj Bijili Har Ghar Yojana, Smart Cities Mission, Pradhan Mantri Awas Yojana, and Prime Minister's Gram Sadak Yojana.

3. For strategic infrastructure projects in the northeast, a separate National Highways and Infrastructure Development Corporation Limited has been set up.

4. A target to construct 10,000 kilometers of national highways in 2019 and a total of 2 lakh kilometers by 2022 has been set.

5. Steps to increase the capacity of green energy corridor project along with other wind and solar power projects, to boost telecom infrastructure has also been taken.

6. In 2017 a new Metro Rail policy was announced to boost private investment in the sector. A new committee to lay down standards for metro rail systems was approved in June 2018.

7. A huge amount of money has been spent on urban infrastructure under initiatives like Smart City project, HRIDAY, and AMRUT.

How has the international market responded?

1. The country is witnessing significant interest from international investors in the infrastructure space.

2. In June 2018, the Asian Infrastructure Investment Bank announced funds for the National Investment and Infrastructure Fund.

3. According to the Department of Industrial Policy and Promotion, foreign direct investment received in construction development sector including townships, housing, build up infrastructure and construction development projects from April 2000 to June 2018 stood at 1,75,296 Cr rupees.

How important is investment for the sector?

1. According to the Economic Survey 2018, India needs about 4.5 trillion dollars in the next 25 years for infrastructure development.

2. The Global Infrastructure Outlook reflects that rising income levels and economic prosperity is likely to further drive demand for infrastructure investment in India over the next 25 years.

3. By 2022, India is expected to become the third largest construction market globally.

4. India needs investment worth 50 trillion rupees in infrastructure by 2022 to have sustainable development.

Where the sector faces hurdle?

1. Financial resources should be made available well in time.

 2. Private Sector participation: They are interested in taking Engineering, Procurement, and Construction (EPC) projects but they don't invest in the road projects.

3. Procedural delays: Clearances related to availability of land under the Land Acquisition Act, environmental issues consume a lot of time. It results in cost overrun and benefits will not accrue to the citizen.

4. The highway sector has not kept pace with innovative technologies.

5. Availability of quality building material for different terrains also remains a challenge.

6. Funding constraints, delays related to identification and award of projects, and the shortage of skilled manpower are some other problems.

When the situation will improve?

1.  Despite easing regulations private infra investment has lagged substantially largely because banks are unwilling or lack capacity to fund projects

2. Further given the hardening of global and domestic interest rates, asset owners see deterioration in the value of their assets.

3. Also, most PPP projects are capital intensive, it is likely to result in the availability of lower cash flow for reinvestment.

4. So there is a need for more efficient processes in credit risk pricing. credit ratings must reflect embedded credit risk to enable a higher flow of credit.

5. Create an efficient mechanism to resolve interdepartmental, inter-ministerial issues in no time to avoid procedural delays.

6. There is also a need to shift from an incremental improvement in the budget allocation to a substantial improvement to fund the infrastructure projects.

What are the recent developments?

India has also come a long way in connecting remote areas through roads and highways.

The government's focus has been to bridge India's infrastructure gap amid a booming population.

A. Bogibeel Bridge:

1. In December 2018, the Bogibeel bridge was inaugurated in Assam. It will connect the south bank of the Brahmaputra River in Assam and Arunachal Pradesh.

2. It is Asia's second longest rail cam Road bridge.

3. It also boosts defense logistics along the China border and reduces travel time for rail passengers and road users.

B. Western Peripheral Expressway:

1. The Kundli-Manesar–Palwal (KMP) Western peripheral expressway was inaugurated in November 2018 in order to cut down the extra traffic in Delhi.

C. Bharatmala Yojana:

1. It is a centrally funded road and highways project.

2. It aims at linking India's west to the east land border from Gujarat to Mizoram. It will also link a road network in coastal states from Maharashtra to West Bengal.

3. It also provides strategic advantages, apart from benefiting local population and improving export and import.

D. Char Dham Highway:

1. The Char Dham Mahamarg Pariyojana aims to improve connectivity to the Char Dham pilgrimage centers in the Himalayas.

E. Sagar Mala project:

1. It promotes ports led direct and indirect development and provides infrastructure to transport goods to and from ports quickly, efficiently and cost-effectively.

2. It is expected to be implemented by May 2019.

F. Inland Waterways:

1. The government has planned inland waterways on rivers like Ganga, Brahmaputra, and Mahanadi under this project.

2. It aims to develop waterway facilities in Ganga and aims at promoting inland waterways as a cheaper and more environment-friendly means of transport.

G. The multimodal terminals are being built as part of the central government's Jal mark Vikas project.

H. Mumbai trans-harbour link will be country's longest sea bridge at 22.5 kilometers. It will connect Mumbai's eastern suburbs with the mainland.

I. The Chenab bridge, the world's highest bridge, over Chenab River in Jammu and Kashmir is also being constructed.