With perhaps a view to perking up industry and market sentiments before the Budget, the Centre unveiled an ambitious, ₹102-lakh crore five-year infrastructure development plan across 22 sectors and 18 States and Union Territories — with the principal focus on roads, housing and urban development, railways, power and irrigation. Ambitious plans have been rolled out by both this and earlier governments, but their implementation has floundered for a host of factors. Finance and resistance to land acquisition, besides controversies over pricing, construction and operation in PPPs, have led to projects running aground and becoming expensive. Recognising this backdrop, the Finance Minister has said that there will be “flexibility” in dropping a project and picking up a new one. Assessing why past projects didn’t work out is important, before embarking on new ones. Private participation in infrastructure has been a patchy affair. The Economic Survey 2012-13 notes that it “increased from 22 per cent in the Tenth Five Year Plan to 38 per cent in the Eleventh Plan”. The fact that private stake in the National Infrastructure Pipeline is envisaged at just 22 per cent, with the Centre and States pitching in 39 per cent apiece, is clearly an acknowledgment that private funds are not forthcoming, after the 2003-08 boom. As the RBI’s recent Financial Stability Report observes, infrastructure NPAs still loom large. The recognition by the Centre that governments need to pick up the tab, rather than wait for the clean-up of bank and corporate balance sheets, is to be welcomed.

However, finance is a sticking point. With GST collections faltering, it is a mystery how States will fork out their share. It doesn’t help that India’s project finance ecosystem is in shambles. Development finance institutions of yore, after burning their fingers on industrial lending, have long since pivoted to universal banking. Take-out financing as a solution to asset-liability mismatches never really took off, as the entities that would ‘take out’ the loan from the banks’ books after the medium term never really materialised. The government may need to explore new funding avenues such as unlocking capital through the monetisation of idle assets. It should stay off raiding PSU balance sheets. The long-pending task of expanding India’s nascent bond market through wider retail and institutional participation is a must. Entities such as the Indian Railways and the NHAI may need to transition to commercial accounting to make their offers palatable to professional investors.

The NIP has stuck to hackneyed priorities, by prioritising physical over social infrastructure. The abysmal outlays on health and education, which together account for less 3 per cent of the funds earmarked, even as roads alone account for nearly 20 per cent, suggest a chronic policy blind-spot. The economic gains, including employment creation, to be had by developing human capital are more enduring in nature.