Infrastructure sector gets no big bang announcements from Union Budget but support continues

The consumption sector is hopeful for a potential boost in the full budget in July 2024.

The central government continued with its capex push in the interim Budget for 2024-25 but refrained from major announcements on infrastructure projects.

“Building on the massive tripling of the capital expenditure outlay in the past 4 years resulting in huge multiplier impact on economic growth and employment creation, the outlay for the next year is being increased by 11.1 per cent to eleven lakh, eleven thousand, one hundred and eleven crore rupees (` 11,11,111 crore). This would be 3.4 percent of the GDP,” Finance Minister Nirmala Sitharaman said in her shortest budget speech ever as she presented the interim Budget of the government on February 1.

The government has increased the capex for 2024-25 by 11 percent to Rs 11.11 lakh crore. While this may be lower than the 15 percent increase, many from the industry were expecting, it is still significant and will spur infrastructure growth.

“The additional allocation of Rs 1.1 trillion for capex, taking it to Rs 11.1 trillion, should provide continuity in the pace of infra creation and in bringing down the logistics cost in the country progressively,” said Ranen Banerjee, Partner and Leader Economic Advisory, PwC India.

Other key announcements that will help the infrastructure sector include:
1. Three major economic railway corridor programmes will be implemented– (1) energy, mineral, and cement corridors, (2) port connectivity corridors, and (3) high-traffic density corridors.

The projects have been identified under PM Gati Shakti for enabling multi-modal connectivity. This will provide the much-needed push to the logistics industry and in the long term, reduce cost for all industries.

2. As part of the government's Gati Shakti master plan, 50-year interest-free loans to state governments have been extended for another year. The PM Gati Shakti Master plan, a pet project of Prime Minister Narendra Modi which found prominent mention in Sitharaman’s budget speech of 2022-23, involves holistic policymaking for the seven infrastructure sub-sectors, with one digital portal that can be accessed by all stakeholders for real-time information.

3. The Ministry of Road Transport and Highways (MoRTH) will get a Union Budget allocation of Rs 2.78 lakh crore in FY25, up 2.8 percent on year. While road construction in the country has slowed in the current fiscal, this allocation may help boost the construction of highways and expressways amid rising interest expenses and increasing land acquisition costs.

4. The Indian Railways will receive a capex push of Rs 2.52 lakh crore for the financial year 2024-25, an increase of 5 percent from Rs 2.4 lakh crore allocated a year ago. In her speech, the Finance Minister also said that around 40,000 trains running as part of the Indian Railways will be upgraded to Vande Bharat trains.

5. Bolstering the recently announced rooftop solar scheme for households, also known as the 'Pradhan Mantri Suryoday Yojna', Finance Minister Nirmala Sitharaman said that solar installations are intended for one crore households through this scheme. This is expected to result in savings of about 300 units of electricity per month for such homes. On an annual basis, the Finance Minister said, the scheme could result in savings of Rs 15,000-18,000. The announcement is important as it signals that the government is looking at building green energy infrastructure not just as central initiatives but through plans that have larger participation.