Eye on the road, but no cash in sight

Building next generation infrastructure — both physical and social — was the first dimension of the Government’s Vision 2030 for India, unveiled by Finance Minister Piyush Goyal on Friday.

The Interim Budget 2019-20, however, lacked any major announcements for the sector, providing just a marginal increase in allocations for infrastructure-related schemes, as the focus ahead of the elections has shifted to agriculture, farmers and social spending, experts note.

The capital outlay for roads, railways, and metro projects has been budgeted to increase by 12-19 per cent in 2019-20 over the 2018-19 revised estimates (RE), Shubham Jain, Group Head, Corporate Sector ratings, ICRA Ltd, said. Railways and roads have seen the largest increase in allocation in the Budget. The Finance Minister has announced the overall capital expenditure programme for the Railways at ₹1.58 lakh crore, a 7 per cent increase from ₹1.48 lakh crore announced last year.

The Finance Ministry has allocated ₹83,016 crore to the highways sector as against ₹78,625 crore in the previous Budget (according to revised estimates). The total capital outlay for the road sector has increased by 12.6 per cent to ₹1.74 lakh crore, experts note.

Allocations for metro projects were up by 19.2 per cent from last year’s revised estimates at ₹17,714 crore, which sounds positive for the sector, that has lately seen increased activity, especially in the Tier-2 cities.

Sagarmala programme and focus on developing inland waterways have been identified as one of the major thrust areas of the Government in this Budget.

However, according to K Ravichandran, Senior Vice-President, Group Head-Corporate Ratings, ICRA, the allocation to Sagarmala in terms of budgetary support continues to remain low compared to the cost of planned initiatives under these schemes.

“The spending under Sagarmala in 2018-19 was lower at only 64 per cent of the Budget allocation of ₹600 crore and the Budget allocation for 2019-20 has been reduced to ₹550 crore. Overall, the impact of the Budget is neutral for the sector,” he added.

Power sector

Power sector and renewables have not seen any significant increase in budgetary allocations this year, barring several transmission and distribution-related schemes such as Integrated Power Development Scheme, Deen Dayal Upadhyaya Gram Jyoti Yojna, Strengthening of Power Systems and Power System Development Fund that have seen a substantial increase.

This, according to Sabyasachi Majumdar, Senior Vice-President & Group Head - Corporate Ratings, ICRA, could be a positive sign for distribution utilities as it would enable them to reduce distribution losses in their licence areas.

“The continued thrust towards ensuring electricity access to all rural households under “Saubhagya” scheme is likely to improve energy demand in the country, which is a positive for generating companies,” Majumdar added.

‘Ease of living’

According to Manish Agarwal, Partner & Leader - Infrastructure, PwC India, the growing emphasis on “ease of living” will require wide-ranging urban infrastructure to address issues such as housing and transport, as also air quality and accessibility, while rural industrialisation, which is a key to linking farm sector with industry, will need logistics infra to be significantly upgraded.

“The Budget will not be able to continue to fund all of these, too far in the future.

Going forward, it will be important to take measures to improve the country's credit rating, and attract more long-term foreign capital into infrastructure,” Agarwal said.

With current deficit target revised to 3.4 per cent of GDP, this could remain a challenge, he added.

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