Narendra Modi's big push: Why infrastructure spending has become the cornerstone of Budget 2022

Indian highway network will be increased by 25,000 kilometres in FY23
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It’s all about infrastructure in Nirmala Sitharaman’s fourth budget, as the Narendra Modi government looks to spur up public spending.

To do that, the finance minister has turned her attention to the prime minister’s GatiShakti programme—a Rs100-lakh-crore project—for building holistic infrastructure. The project, launched last October, received its first ever outlay of Rs20,000 crore in the Budget for FY22-23.

“PM GatiShakti is a transformative approach for economic growth and sustainable development,” Sitharaman said in her speech. “The approach is driven by seven engines, namely, roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure. All seven engines will pull forward the economy in unison. These engines are supported by the complementary roles of energy transmission, IT communication, bulk water & sewerage, and social infrastructure.”

As part of the plan, the Indian highway network will be increased by 25,000 kilometres in FY23, in addition to adding more Vande Bharat trains in the country. Sitharaman said that 400 new generation Vande Bharat trains would be manufactured by 2025 as part of the master plan. The trains would have better energy efficiency and passenger riding experience.

“The touchstone of the master plan will be world-class modern infrastructure and logistics synergy among different modes of movement—both of people and goods—and location of projects,” she said. As part of Atmanirbhar Bharat, 2,000 km of railway network will be brought under Kavach, the indigenous world-class technology for safety and capacity augmentation in 2022-23. “One hundred PM GatiShakti cargo terminals for multimodal logistics facilities will be developed during the next three years,” the finance minister added.

The Gati Shakti programme intends to incorporate the infrastructure schemes of various ministries and state governments, including the Bharatmala, Sagarmala, inland waterways and UDAN scheme, along with economic zones like textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial corridors, fishing clusters and agri zones to improve connectivity to help make Indian businesses more competitive.

The programme will also leverage technology extensively, including spatial planning tools with ISRO (Indian Space Research Organisation) imagery developed by BiSAG-N (Bhaskaracharya National Institute for Space Applications and Geoinformatics).

The government also announced Parvatmala, a national Ropeways Development Programme, that is being positioned as a sustainable alternative to conventional roads in difficult hilly areas. “The National Ropeways Development Programme will be taken up on PPP (public-private partnership) mode,” Sitharaman said. “The aim is to improve connectivity and convenience for commuters, besides promoting tourism. This may also cover congested urban areas, where conventional mass transit system is not feasible.”

The government now plans to award contracts for eight ropeway projects for a length of 60 km in 2022-23.

“Budget 2022 has a major focus on the creation of infrastructure through PPP which can be seen from Gati Shakti implementation based on seven growth engines and digital highway for data transfers between various modes,” says Abhaya K Agarwal, national leader, government and public sector infrastructure, EY India. “The announcements such as 25,000 km of highways, four multi-modal logistics parks on PPP, 100 Gati Shakti cargo terminals, 400 Vande Bharat trains, a string of ropeway projects in hilly areas, a high priority for Ken-Betwa river link project and 60,000 crores for ‘Har Ghar Nal Se Jal’ lay the overall vision of the government.”

Last year too, Sitharaman had announced a slew of measures for the country’s infrastructure sector, including the highest-ever capital outlay for roads at Rs118,101 crore for the ministry of road transport and highways.

However, this year, the finance minister stayed away from big announcements on new projects in the Indian ports and airports sector. "Innovative ways of financing and faster implementation will be encouraged for building metro systems of appropriate type at scale," Sitharaman said. "Multimodal connectivity between mass urban transport and railway stations will be facilitated on priority. Design of metro systems, including civil structures, will be reoriented and standardised for Indian conditions and needs."

“The overall budget capex increase by 35 percent gives a clear message to the nation that infrastructure remains key agenda,” adds Agarwal. “The focus on PPP with balanced risk allocation with the help of multilateral banks indicates that the government is keen to mainstream PPPs for additional resources and project implementation. Additional one lakh crore interest free support to the states for implementation of Gati Shakti and rural roads will lead the acceleration of local economy and is a right step towards a five trillion economy.”