Infrastructure measures for booming economy

It is beyond doubt that India began laying emphasis on infrastructure-led economic growth during the Vajpayee regime. The decade lost between the Vajpayee regime the Narendra Modi government failed to continue it, but the Modi government walked that course despite inheriting an economy burdened with the absence of a conducive economic entourage for investments. The first term saw the doubling up of cumulative capital expenditure. Concurrently the contours of the strategy for infrastructure investments were conceived along the lines of economic and banking reforms, planning, monitoring and resolution, in that order.

The seven years of the Modi government spelt out various economic measures categorised under starting a business, construction permits, taxation, trading across borders etc leading to the Ease of Doing Business ranking jumping to 63 in 2019 from 142 in 2014. India now has a strong banking sector aided by measures such as the Insolvency and Bankruptcy Code, the merger of banks, recapitalisation and the setting up of National Asset Reconstruction Company. A Development Financial Institution (DFI) to be set up under NABFID Act will complement the banking sector. A stable and low-interest rate regime was fostered by flexible inflation targeting.

Amidst the aforementioned economic and banking reforms, the government announced National Infrastructure Pipeline (NIP). The final NIP Task Force report estimates that Rs 111 lakh crores ($1.6 trillion) need to be invested in five years from FY20 to FY25 with the aim of a $5-trillion economy by FY25. NIP is a compendium of investable infrastructure projects - greenfield or brownfield, under implementation or conceptualisation. The report emphasises that India needs to make $4.5 trillion of infrastructure investments by FY30 including $1.6 trillion to sustain high economic growth rates.

The Centre and states have an almost equal share in executing the NIP followed by the private sector. As per a 2013 RBI paper, the multiplier effect of infrastructure investments is higher when undertaken at the level of states. This Is why states are included as stakeholders in NIP. Politically too, NIP will have the least resistance. Union Budget 2021-22 allocated 5.54 lakh crores towards capital expenditure whose share in government expenditure is highest in a decade.

The NIP Task Force’s final report suggests a National Monetization Pipeline (NMP) to meet elevated capital expenditure. It intends to monetise operational public infrastructure assets excluding land for tapping private-sector efficiencies, thus helping create a cycle of developing, commissioning, monetising and investing. Through this, the government hopes to garner over Rs 6 lakh crores over four years from FY22 to FY25. The government will own the assets but will lease them out to the private sector for a stipulated time after which they will be handed back — a transfer of operational rights, not ownership rights. Picking up from Union Budget 2021-22, NMP incentivises states to undertake divestment and asset monetisation for channelling investments into infrastructure.

Both NIP and NMP will be driven by real-time dashboards to showcase investment opportunities to domestic and international investors. NIP has 7,400 projects to choose from, while NMP has operational assets from 13 sectors including roads, railways, telecom, power and more. Investors choose the projects from NIP or assets from NMP, bid and access capital for execution or operation. This will lessen the failure of investments.

There will be bottlenecks, delays and cost overruns once this takes off. However, the projects will be monitored in real-time with high priority. NIP and NMP are the first exercises in India to select projects/assets to resolve problems. NIP will serve as a template for infrastructure investments for decades beyond FY25. Likewise, NMP will serve as a template for the monetisation of public infrastructure assets.

The reforms-to-resolution approach will promote seamless and sustainable infrastructure investments from all stakeholders. This will ensure inclusive and equitable access to infrastructure. Every citizen will have equity in the economic growth of India. Along with socio-economic benefits, PM Modi believes this approach can help make India self-reliant.

(The writer is Joint Convener, Election Commission Cell, Telangana BJP)

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