Funding $1.4-trillion NIP is a challenge: Economic Survey

Mamuni Das New Delhi | Updated on January 31, 2020

Adequate infrastructure is essential for inclusive growth, the Economic Survey said, adding that road transport plays a key role in development   -  THE HINDU

Well-prepared projects plans might attract investors: Survey

Admitting that raising funds for the Centre’s plan to spend $1.4 trillion on infrastructure over the next five years is a “challenge”, the Economic Survey has expressed hope that a set of well-prepared projects might help attract investors.

India recently launched the National Infrastructure Pipeline (NIP), which lists projects in various sectors for a five-year period up to FY25. Adequate infrastructure is essential for inclusive growth, the Survey said.

India has set a target of becoming a $5 trillion economy by 2025.

“Financing of the National Infrastructure Pipeline will be a challenge but the Survey hoped that a bouquet of well prepared project(s) will attract (investments) from Central and State governments, urban local governments, banks and financial institutions, private equity funds and private investors, both local and foreign,” said an official release on the Survey.

Productivity of infra

That said, the Survey has also listed how changes in processes and the use of technology have helped improve the productivity of infrastructure. The use of FASTags (the RFID tags on vehicles that can be used to make electronic toll payments) is expected to lower the waiting time at highways. The turnaround time for ships at ports has come down, it noted.

The Survey has also indicated that huge investments in infrastructure may lead to a high fiscal deficit. “Investment in the public sector may increase, as is expected after the announcement of NIP projects worth ₹102-lakh crore. If this leads to the expansion of fiscal deficit, bond yields may increase, thereby possibly crowding out private investment,” it said.

Despite the concern, the Survey has called for the adoption of “next generation infrastructure” as the way forward. Next-generation infrastructure will adopt physical infrastructure and technology like Internet of Things and automation together to maximise the efficiency of physical infrastructure. It also called for the promotion of Industry 4.0, which advocates the adoption of automation for growth.

Infrastructure investments are necessary as physical infrastructure helps create more jobs and promotes entrepreneurship, the Survey noted, adding that power shortages, inadequate transport and poor connectivity dampen growth.

Policy lever

“Physical infrastructure, apart from literacy and education, is the policy lever that district and state administrations must focus on to foster entrepreneurship and, thereby, job creation and wealth creation,” it added.

On the transport sector, the Survey said road transport is the dominant mode in terms of its contribution to Gross Value Added (GVA). GVA measures the net contribution of a sector minus the inputs. The share of the transport sector in the GVA was about 4.77 per cent, of which the largest chunk was contributed by road transport (3.06 per cent), followed by railways (0.75 per cent), air transport (0.15 per cent) and water transport (0.06 per cent), said the release.

Published on January 31, 2020

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