On the Budget front, continuity has been the name of the game for the infrastructure space. One of the focus areas of the government is infrastructure and investment. Over the past four years, the government has tripled its capital expenditure and interim Budget 2024 has continued in this path by allocating a formidable outlay of over ₹11-lakh crore (y-o-y increase of around 11.1 per cent) for the upcoming year.

On similar lines, the government seems to be clear and consistent in its green energy initiatives with a long-term target of ‘net zero’ by 2070. Measures announced in the Budget include viability gap funding for offshore wind energy potential for 1 GW, goal of coal gasification and liquefaction capacity of 100 mt by 2030, plan for augmentation for roof top solar, and more. These initiatives are aimed at implementation of India’s climate action plans and ambitious expansion of non-fossil fuel capacity which has more than doubled in the last nine years, from 80.3 GW in March 2014 to 187.06 GW in November 2023.

Private investment

While government spending, especially in the infrastructure space, has been the go-to means to spur up the economy, there is a clear acknowledgement of the role of private investments, especially foreign capital, in the rapid development of infrastructure in India. In recognition of the role played by sovereign wealth funds (SWFs) and pension funds (PFs), the government introduced a tax incentive in Budget 2020 to provide tax exemption for various streams of income earned by PFs/SWFs in the form of interest, dividend, and capital gains. One of the critical conditions for the tax exemption was that the investments should be made by SWFs and PFs on or before March 31, 2024.

In a welcome and expected move, interim Budget has extended the tax exemption for qualifying investments made up to March 31, 2025. In doing so and without waiting for the final Budget later in the year, the government has provided a clear and unambiguous signal that it values the investment by SWFs/PFs and that it is in favour of continuity in tax policy.

The subject extension of tax exemption is a step in the right direction and would further the government’s efforts to encourage sustained flow of private funds in the infrastructure space in India, which in turn would give a flip to the overall economy. The hope of course is that in the final Budget to be presented post elections, the government of the day would provide a longer extension of this tax exemption, that is, beyond March 2025. Overall, from an infrastructure sector’s perspective, this is a Budget of clarity and continuity.

Maroo is Partner and Head, M&A and PE Tax, and Nagda is Partner, M&A and PE Tax, KPMG in India. With inputs from Digesh Shah