Sustained push towards infrastructure driven growth and economic development has been a key theme of domestic policy-making in recent years. The upcoming Union budget will likely hold onto this agenda given the population growth the increased urbanization. The capital expenditure outlay in the last year’s Union Budget 2023-24 was increased by 37.4% to Rs10 lakh crore. Infrastructure and logistics are key drivers of the economic growth and a sustained focus on these pillars of growth could be expected in the form of increased spending.
Seamless connectivity is a critical aspect of overall economic vibrancy and acts as key in joining multiple factors of economic production. According to official estimates, Budgetary allocation of the Ministry of Road Transport & Highways has increased from about Rs. 31,130 Crore in 2013-14 to about Rs. 2,76,351 Crore in 2023-24.Budgetary allocation for 2024-25 is Rs. 2,78,000 Crore. NH network length in the country has increased by 1.6 times from 91,287 km in March, 2014 to 1,46,145 km at present. With increased budgetary allocation since April 2014, quality of roads has improved substantially. Length of 4 lane and above NH network has increased by more than 2.5 times from 18,371 km in 2014 to 46,720 km. Also less than 2 lane NHs has almost halved from 27,517 km to 14,350 km by bringing down the share of less than 2 lane NHs from 30% to 10% of the total NH network.
Further, the ministry has decided to focus on development of High Speed Access controlled NHs for improving the logistics efficiency of the country. In addition, Ministry has also adopted a policy to improve all NHs as per the traffic requirement but minimum Two Lane with paved shoulders standards except for ecologically sensitive Himalayan region where development plan is finalised considering the geological, environmental factors etc.
Through launch of PM GatiShakti National Master Plan and National Logistics Policy, government has prioritized large-scale infrastructure projects and improved logistics service efficiency respectively. Some of the key reforms to improve logistics efficiency include, 23 States/UTs notified State Logistics policies, Land Port Management System (LPMS), digitization at Ports; NLP Marine, and FASTAG. Investments in infrastructure yield a direct multiplier of over 2.5x on the economy, and roads sector in India has presented itself as a priority recipient of these investments. Over the last decade, there has been more than 50 per cent increase in the total length of highways in the country.
Budget Expectations:
Sustained increase in infrastructure spending. FICCI recommends the government continue its focus on public capital expenditure (capex) for physical, social, and digital infrastructure. It suggests increasing the capex outlay for FY25 by 25% over the Revised Estimate (RE) for FY24 to Rs 11.8 lakh crore.
There is likely to be a greater focus on railway passenger comfort and convenience following the recent episodes of railways accidents and frequent derailments. Some impetus towards modernizing stations, and upgrading train services are critical.
With a major thrust on the industrial sector, the budget can offer a direct push to modernizing freight and logistics sector in the country.
Outlook:
The budget will likely offer a rounded approach towards long term infrastructure needs of the country. It may provide a five year vision focusing on economic revitalization with a confluence of ideas linking the economic hubs through multimodal networks to ensure last mile connectivity for the masses. The Finance Minister had, a few months back, stressed that there are certain sectors where the government will push more with new innovations, investments and policy reforms. These include EVs, Space, AI, warehousing, logistics, agriculture value addition and agriculture efficiencies, tourism, green hydrogen. India’s logistics potential is just not even touched; we have immense scope in this. Sitharaman also highlighted on the potential of digital infrastructure which will play a key role in India achieving Viksit Bharat. Among other factors of production, the 21st century has come up with one more - digital infrastructure, she added. The Finance Minister further stated that the government is showing its commitment by ramping up capital expenditure and urged the industry to expand and look for greater joint ventures around the world.