The Central Government’s plan of a massive increase in investment with the target of ₹111 lakh-crore under the National Infrastructure Pipeline (NIP) between FY2020-25 is likely to see severe near-term headwinds due to the pandemic, according to ICRA.

While even prior to the Covid-19 outbreak, the NIP was already quite ambitious and challenging, it seemed achievable with a significant push for infrastructure. But the virus outbreak has now made it a daunting task to achieve the target.

The government’s priority will be to fight the pandemic and the disruption caused. With fiscal constraints the investment in infrastructure may get pushed back – particularly by the State governments. Investments from the private sector are also likely to be deferred or scaled down.

Shubham Jain, Senior Vice-President and Group-Head, Corporate Ratings, ICRA, in a statement said, “In the current environment, the infrastructure investment in FY2021 would fall short of the plan, and consequently to achieve the NIP target a significant step-up of investments will be required in the later part of the plan. Against the total infrastructure investment of ₹36 lakh-crore envisaged in the first two years of NIP (FY2020-21), the actual investment is likely to range between ₹24-27 lakh crore. Consequently, to achieve the targeted investments in the remaining four years, an average annual investment of over ₹21 lakh crore will be required.”

The total infrastructure investment in India, between FY2013 to FY2019, stood at ₹57 lakh-crore. Compared with this, the NIP has planned an investment of over ₹111 lakh-crore during FY2020 to FY2025 – which is higher by 109 per cent. About 39 per cent of the projects will be implemented by the Centre, 40 per cent by the State governments, and the balance 21 per cent by the private sector. The NIP envisions a significant scale-up of investments from FY2021 onwards with an investment of ₹21.5 lakh-crore in FY2021 compared to ₹10 lakh crore of investments made in FY2019.

Jain added: “To bridge the infrastructure financing deficit, leveraging the Central Road and Infrastructure Fund (CRIF), the National Investment and Infrastructure Fund (NIIF), and the Infrastructure Investment Trust (InvITs) could support to some extent. InvITs have shown the potential of channelising long-term capital (like pension and insurance fund) into the infrastructure sector.”

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