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Promoting Economic Growth Through Infrastructure Initiatives in India CSR

Promoting Economic Growth Through Infrastructure Initiatives in India CSR

Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman today presented the Union Budget 2024-25 in Parliament. This Budget envisages sustained efforts on nine key priorities to create adequate opportunities for all, in the pursuit of ‘Viksit Bharat.’ The key priorities are agricultural productivity and resilience, employment and skills, inclusive human resource development and social justice, manufacturing and services, urban development, energy security, infrastructure, innovation, research and development and next generation reforms. Of these, key announcements have been made in the infrastructure sector.

Infrastructure Development

The Finance Minister highlighted the significant investment made by the central government over the years in building and improving infrastructure, which has had a strong multiplier effect on the economy. The government will maintain strong fiscal support for infrastructure over the next five years, while balancing other priorities and fiscal consolidation. This year, an allocation of ₹11,11,111 crore has been made for capital expenditure, which is 3.4 per cent of GDP.

The government will encourage states to provide similar scale support for infrastructure, in line with their development priorities. This year, a provision of ₹1.5 lakh crore for long-term interest-free loans has been made to help states with their resource allocation. Private sector investment in infrastructure will be promoted through viability gap financing and supportive policies and regulations. A market-based financing framework will also be introduced.

Despite many financial innovations in infrastructure financing in recent years, capital expenditure by the Union and state governments continues to play a central role in financing large-scale infrastructure projects. The Union government’s capital expenditure increased 2.2 times from FY21 to FY24 (PA), while that of state governments increased 2.1 times during the same period.

The net flow of funds to infrastructure sectors through bank lending between March 2023 and March 2024 was only about ₹79,000 crore, much less than the Union government’s GBS for railways or roads. The net flow of funds from bank lending between March 2020 and March 2024 was concentrated in just a few sectors – roads, airports and power. However, credit growth to infrastructure sectors recovered to 6.5 per cent in FY24, compared to 2.3 per cent growth in FY23.

Gross inflows of external commercial borrowings to infrastructure sectors also increased to USD 9.05 billion in FY24, compared to an average of USD 5.91 billion during FY20 to FY23. Fund mobilisation by infrastructure sectors through debt and equity issuance in the capital market stood at a little over ₹1,00,000 crore during FY24. Real estate investment trusts (REITs) raised ₹18,840 crore from 2019-2024, while infrastructure investment trusts (InvITs) raised a total of ₹1,11,294 crore in the last five years (2019-2024).

Existing mechanisms for promoting public-private partnerships (PPPs)

Public-Private Partnership Assessment Committee (PPPAC)

  • The highest body for assessing PPP projects in the central sector.
  • 77 projects with a total cost of ₹2.4 lakh crore were recommended for the period FY 2015 to FY 2024.

Viability Gap Financing (VGF)

  • Assistance with financially unviable but socially/economically desirable PPP projects.
  • 57 projects costing Rs. 64,926.1 crore received in-principle approval and 27 projects costing Rs. 25,263.8 crore received final approval from FY15 to FY24.
  • Total VGF approval of Rs. 5,813.6 crore (both federal and state share) from FY15 to FY24.

India Infrastructure Project Development Fund Scheme

  • Financial support for project development of PPP projects
  • Announced in November 2022 with a total outlay of Rs. 150 crore for three years from FY23 to FY25.
  • 28 proposals have been approved.

National Monetization Pipeline (NMP)

NMP was announced in August 2021 based on the principle of ‘asset creation through monetization’, that is, tapping private sector investment for the construction of new infrastructure.
The total monetisation potential under NMP was estimated at ₹6.0 lakh crore through the government’s core assets, over four years from FY22 to FY25.

Other support tools

Reference manuals have been developed for setting up state PPP units, assessing PPP projects and selecting the implementation mode for projects.
Web-based toolkits, a post-award contract management toolkit and a contingent liability toolkit have been developed for project sponsoring authorities to assist them in structuring PPPs.

Pradhan Mantri Gram Sadak Yojana (PMGSY)

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The Finance Minister has announced in the Union Budget that Phase IV of PMGSY will be launched to provide all-weather connectivity to 25,000 rural areas that have been identified due to population growth.

The Pradhan Mantri Gram Sadak Yojana, launched on December 25, 2000, aims to provide all-weather access to eligible unconnected habitations and is a 100% centrally sponsored scheme. As of July 23, 2024, 8,10,083 km of roads have been approved, of which 7,65,530 km have been completed. A total of ₹3,24,177 crore has been spent under this scheme.

Irrigation and flood control

For irrigation and flood mitigation in Bihar, the government will provide financial assistance for projects estimated at ₹11,500 crore through the Accelerated Irrigation Benefit Programme and other sources. This includes the Kosi-Mechi intra-state link and 20 other ongoing and new schemes. The Union Budget also announced assistance for flood control, landslide and related projects in Assam, Himachal Pradesh, Uttarakhand and Sikkim.

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The Union Budget 2024-25 shows a strong commitment to promoting infrastructure and economic growth. The continued emphasis on public-private partnerships and infrastructure investments reflects the government’s vision of a ‘Viksit Bharat.’ With sustained efforts and strategic initiatives, India is well positioned to achieve significant economic progress and development in the years to come.

(India CSR)