Railways, airports and more roads: How Budget 2023 is gearing up for increased infrastructure spending

With the treat of a global recession, increased government spending might bring in more jobs and stimulate private consumption

By Manu Balachandran Forbes India Staff

Published: Feb 1, 2023 06:14:48 PM IST

Updated: Feb 1, 2023 06:20:10 PM IST

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Just like last year, Nirmala Sitharaman’s fifth budget has a lot of infrastructure spending. Presenting the last full budget before a decisive election in 2024, the finance minister has kept to Prime Minister Narendra Modi’s tried and tested formula of increased spending towards the country’s key infrastructure sector, including roads, railways and airports.

The benefit of that is fairly simple, especially as the global economy stares at a sharp recession: Increased government spending means job creation in addition to stimulating private consumption and investment spending.

To start with, Sitharaman has allocated Rs 2.4 lakh crore towards Indian Railways capital expenditure this year, nine times higher than the amount in the financial year 2013-14. The funds will mostly be spent on building tracks, new coaches, electrification, and developing facilities at stations.

The railways is in the midst of transformation, with the government looking to replace some of the existing trains with the Vande Bharat trains. Last year, the government had announced plans to roll out 400 Vande Bharat trains by 2025. Additionally, over 1,000 coaches of trains including Rajdhani, Shatabdi, Duronto, Humsafar and Tejas will be refurbished. The railways is likely to use the funds for track expansion and electrification in addition to newer coaches and trains.

“The government has continued its infrastructure push as it has increased capital expenditure by 33 percent to Rs 10 lakh crore,” says Sanjay Kumar, partner, Deloitte India. “The key aspects are increase in capital outlays for railways to an all-time high, along with additional focus on logistics that will impact the overall cost of business and possibly address the larger issue of higher trade costs within the country. While the hard numbers are welcome, the more nuanced push for better development across cities by focusing on urban planning reforms is welcome.”

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The government has now identified one hundred critical transport infrastructure projects for last- and first-mile connectivity for the ports, coal, steel, fertiliser, and food grains sectors, where it intends to ramp up investments. “They will be taken up on priority with an investment of Rs 75,000 crore, including Rs 15,000 crore from private sources,” Sitharaman said in her speech.

The government has also decided to raise the allocation towards the roads ministry by some 36 percent to Rs 2.7 lakh crore for 2023-24. The country, which currently has over 1.4 lakh km of highways, had planned to build 25,000 km last year. This year’s allocation is nearly a 10 percent jump over the budgetary allocation of Rs 1.99 lakh crore made for 2022-23. Last year, according to the economic survey, India built a little over 10,000 km. Of the total outlay of Rs 2.7 lakh crore, the National Highways Authority of India has been granted Rs 1.62 lakh crore, a 21 percent increase compared to 2022-2023.

Then there is also the focus on reviving 50 additional airports, heliports, water aerodromes and advance landing groundings for improving regional air connectivity. On January 31, the economic survey had said the civil aviation sector “has great potential owing to growing demand from the middle class, growth in population and tourism, higher disposable incomes, favourable demographics, and greater penetration of aviation infrastructure." That has meant the finance minister has also allocated Rs 3,113.36 crore to the civil aviation ministry this year. Much of that is also in line with the government’s plan to push for regional air connectivity through its flagship scheme, UDAN, which focuses on connectivity between Tier-2 and Tier-3 cities.

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In December, domestic air passenger traffic in the country stood at 12.9 million in the highest since January 2020. Today, India’s domestic aviation market is led by low-cost carriers that control as much as 80 percent of the market, led by market leader IndiGo which corners nearly 60 percent.

“The initiative to provide additional infrastructure support with fifty new airports, heliports, water aerodromes, and advanced landing zones in India, along with the simplification of registration and overall regulations under the GIFT IFSC will pave the way for new entrants in the aviation industry, which has experienced increasing demand both domestically and internationally,” says Nishant Pitti, CEO and co-founder, EaseMyTrip.

The government also reckons that the newly-established Infrastructure Finance Secretariat will be key to assisting all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are predominantly dependent on public resources.