India Needs To Spend USD 1.4 Trillion on Infrastructure

ouquet of Projects to Attract Investments in Road, Railways, Civil Aviation, Telecom and Housing

The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman tabled the Economic Survey 2019-20 in Parliament today.  The Economic Survey gave a detailed analysis of the trends in India’s infrastructure sector.

The Survey emphasized that investment in infrastructure is necessary for growth.  Power shortages, inadequate transport and poor connectivity affects overall growth performance.  Since provision of adequate infrastructure is essential for inclusive growth,  India recently launched the National Infrastructure Pipeline (NIP) for the period FY 2020-2025.

To achieve GDP of USD 5 trillion by 2024 – 2025, India needs to spend about USD 1.4 trillion (₹ 100 lakh crore) over these years on infrastructure so that lack of infrastructure does not become a constraint to the growth of Indian economy.  NIP is expected to enable well prepared infrastructure projects that will create jobs, improve ease of living and provide equitable access for infrastructure for all thereby making growth more inclusive, the Survey observes.

As per the NIP, Central Government (39 per cent) and State Government (39 per cent ) are expected to have equal share of funding of the projects followed by the private sector (22 per cent).  Projects worth ₹ 42.7 lakh crore (42 per cent) are under implementation.  Financing of the National Infrastructure Pipeline will be a challenge but the Survey hoped that a bouquet of well prepared project will attract from Central and State Government, urban local government, banks and financial institutions, PE funds and private investors, both local and foreign.

The Economic Survey gave an overview of sectoral developments relating to Railways, Road Transport, Civil Aviation, Shipping, Telecom, Petroleum and Natural Gas, Power, Mining, Housing and Urban Infrastructure.

Road Sector

The Economic Survey noted that, road transport is the dominant mode of transportation in terms of its contribution to Gross Value Added (GVA).  In 2017-2018 the share of transport sector in the GVA was about 4.77 per cent of which the share of road transport is 3.06 per cent followed by Railways (0.75 per cent), air transport (0.15 per cent) and water transport (0.06 per cent).

Total investment in the roads and highways sector has gone up more than 3 times in five year period of 2014-15 to 2018-19.

Railways

The Survey marked that during the year 2018-19 Indian Railways carried 120 crore tones of freight and 840 crore passenger making it the world’s largest passenger carrier and fourth largest freight carrier.

Civil Aviation

Taking a comprehensive view of Civil Aviation the Survey observed that India has 136 commercially managed airports by Airport Authority of India and 6 under Public Private Partnerships for operation, maintenance and development of airports.  A total 43 airports have been opeartionalized since the scheme for operationalizing unserved airports (UDAN) was taken up.  India stood first along with 7 other countries in airport connectivity according to the Global Competitiveness Report 2019 of World Economic Forum.

To ease the strain on existing airport capacities 100 more airports are to be made operational by FY 2023-24.  The Survey noted that to continue with the high growth trajectory the Government has been providing a congenial environment so that Indian carrier double their fleet from about 680 aircraft at the close of 2019 to 1200 by FY 2023-24.

Shipping

Talking about the strides in the Shipping sector, the Economic Survey stated that around 95 per cent of India’s trade by volume and 68 per cent in terms of value is transported by sea.  As on 30^th September 2019 India had a fleet strength of 1,419 ships.

The major ports in the country have an installed capacity of 1514.09 MTPA as on March 2019 and handled traffic of 699.09 MT during 2018-19.  The Survey said that the Ministry of Shipping is striving to improve operational efficiencies through mechanization, digitization and process simplification.  The average turnaround time  in 2018 improved to 59.51 hours as against 64.43 hours in 2017-18.`

Telecom Sector

Taking a view of the Telecom Sector the Economic Survey noted that there are four major players in the telecom sector in India today  - three in the private sector and BSNL and MTNL in the public sector. The Survey highlighted that since the price the price of data in India is among the lowest in the world it will help to achieve the goal of developing broad-band highways as part of the digital India campaign.   The Government is implementing the Bharat Net programme in a phased manner for providing Broadband connectivity to all the 2.5 lakh Gram Panchayats in the country.

Petroleum and Natural Gas

The Economic Survey observed that India is the 3^rd largest energy consumer in the world after USA and China.  India’s energy requirement is fulfilled primarily by coal, crude oil, renewable energy and natural gas.  With major reforms undertaken by Ministry of Petroleum and Natural Gas in exploration and licensing policy to enhance exploration activities, attract domestic and foreign investment and accelerate domestic production of oil and gas from existing fields there has been a surge of reserves of crude oil in 2019.

The Survey said that India has a refining capacity of 249.4 MMTPA and is the fourth largest in the world after the United States, china and Russia.  There is a need to augment refining capacity to meet the growing demand for petroleum fuels and petrochemicals.

The Survey felt that in order to encourage the participation of private entities in oil and natural gas sector government has undertaken several reform measures which includes simplified fiscal and contractual terms, bidding of exploration blocks under Category -2 and 3 sedimentary basins without any production or revenue sharing to government, early monetization of discoveries by extending fiscal incentives, incentivizing gas production including marketing and pricing freedom, induction of latest technology and capital, more functional freedom to national oil companies for collaboration and private sector participation for production enhancement methods in nomination fields.

Power

The Economic Survey also noted that the constant efforts of the Government to foster investments in the power sector has resulted in India improving its ranking to 76 position in Energy Transition Index by the World Economic Forum.  Also, universal electrification progress has been made in generation and transmission of electricity.  The installed capacity has increased from 3,56,100 MW in March 2019 to 3,64,960 MW as on 31^st October 2019.

The Survey underlined that access to electricity is necessary for making growth inclusive and for promoting ease of living.  Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) was launched on September 25, 2017 with an outlay of ₹ 16,320 crores to achieve universal household electrification by providing last mile connectivity by 31-03-2019.  The Survey observed that except for few households in Left Wing Extremism affected Bastar Region of Chhattisgarh all the states have reported electrification of all households on the SAUBHAGYA portal.

Mining Sector

The Economic Survey stated that India produces 95 minerals which include four hydrocarbon energy minerals, five atomic minerals, ten metallic, 21 non-metallic and 55 minor minerals.  Mining and quarrying sector contributes about 2.38 per cent to GVA during 2018-19. On a positive note the Survey stated that there has been a notable turn around in mineral production because of policy reforms and production of major minerals during the year 2018-19 has recorded a growth of 25 per cent when compared to last year in terms of value.

Housing and Urban Infrastructure

While giving a overview of the construction sector the Survey said that it accounts for 8.24 per cent of GDP which includes housing and employs about 12 per cent of the work force.  The Pradhan Mantri Awaas Yojana –Urban (PMAY-U) was launched in June 2015.  The Survey said that it is one of the largest housing schemes of the world covering entire urban India and is being implemented through four verticals.  The scheme is moving towards achieving the vision of pucca house to every household by 2020.  Thirtytwo lakh houses have been completed and delivered.

Since the Survey noted since the launch of the Smart City Mission in 100 cities 5,151 projects worth more than ₹ 2 lakh crore are at various stages of implementation.  A total of 1,290 projects worth ₹ 22,569 crores have been completed and are operational.

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