In previous terms, the Narendra Modi government focused on building infrastructure to improve connectivity, reduce logistics costs and enhance India’s business environment. This thrust continues, though without major new announcements, in this year’s budget. Make no mistake. At Rs 11.11 lakh crore, the estimated capital expenditure is still some 3.4 per cent of the GDP. But it’s a modest 11 per cent increase from last budget’s Rs 10 lakh crore. Then, finance minister Nirmala Sitharaman had steeply increased the capital investment outlay by 33 per cent to Rs 10 lakh crore—3.3 per cent of the GDP. That was almost three times the 2019-20 figures. Indeed, after 10 years of keeping infrastructure at the centre of its spending plans—with provisions for new highways, rail projects and airports—the Centre has almost downplayed it. “Why fix something that’s not broken?” explains Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council. “Sectors like highways and railways are success stories. And they have hugely expanded their capacity to absorb capital spend over the years.” In her budget speech, Sitharaman, too, resolved “to maintain strong fiscal support for infrastructure”. To give a fillip to states in building infrastructure, the Centre has kept a provision of Rs 1.5 lakh crore for long-term interest-free loans. Additionally, private investment in infrastructure will be promoted through viability gap funding and supportive policies.
As expected, railways and highways will continue to claim a bulk of the capital spent on infrastructure—around 50 per cent. Rail infrastructure will get a capital expenditure of Rs 2.65 lakh crore, which is 10.4 per cent higher than the previous year’s Rs 2.40 lakh crore. The ministry expects to add Rs 10,000 crore from external sources and around Rs 3,000 crore from its revenues. Hit by a spate of accidents over the past one year, Indian Railways is under pressure to increase safety measures. The budget underlines this as a priority and has earmarked Rs 1.08 lakh crore for it. “A significant fund is earmarked for safety in Railways. In the third term of this government, Railways has continued to get a boost,” says Ashwini Vaishnaw, the minister in charge. The focus on electrification and the rollout of advanced signalling systems too will be kept up.
The budget figures also reveal the financial challenge the national transporter faces, with its pension expenditure ballooning to Rs 65,000 crore. “It’s inevitable, given the size of Indian Railways,” says Dakshita Das, a retired additional member (finance), Railway Board. In ’23-24, Indian Railways earned Rs 2.57 lakh crore from its operations but around 24 per cent goes towards pension. Its operating ratio (money spent to earn every 100 rupees; the lower the better) was an abysmal 98.65 per cent, a rise from 98.1 per cent in 2022-23. For this fiscal, it has projected an optimistic figure of 98.22 per cent. “Therefore, the need of the hour is to boost revenues by maybe an annual Re. 1 fare increase to meet this obligation,” says Das.
To increase its revenue, the Railways will be creating new assets and renewing old ones. It has identified three economic railway corridors—energy, mineral and cement corridors (192 projects); port connectivity corridors (42 projects) and high traffic density corridors (200 projects) under the PM Gati Shakti Mission for enabling multi-modal connectivity. Capacity enhancement, decongestion of high density networks, reduction in logistics cost are important goals too.
The highways sector has got an allocation of Rs 2.78 lakh crore, which is Rs 2,000 crore lower than last year’s revised estimates. Also, Rs 6,000 crore will come from the Central Road and Infrastructure Fund—the cess users pay on petrol and diesel. In 2024-25, the Union road transport and highways ministry plans to construct 10,422 km of national highways, including key projects like the Delhi-Mumbai Expressway. Some 12,349 km of national highways were constructed in the last fiscal. With the NHAI’s Rs 3.4 lakh crore debt stopping further borrowing, direct budgetary allocation is now India’s main funding method for highways. Additionally, Rs 2,377.49 crore has been allocated to enhance port infrastructure and support Sagarmala and inland waterways initiatives.
For investments in rural connectivity and flood management, the Pradhan Mantri Gram Sadak Yojana (PMGSY) will see all-weather connectivity to 25,000 villages. Funds are also allocated for three crore additional houses under the PM Awas Yojana. “There is a limit to how much the Centre can spend on infrastructure. The government has indicated that around 3.4 per cent of the GDP is a good figure going forward. Infrastructure creation is now needed in cities, and not just in Delhi, Mumbai, Bengaluru,” says Neelkanth Mishra, chief economist, Axis Bank.
Additional funds aim to develop industrial clusters: the Kopparthy (Visakhapatnam-Chennai), Orvakal (Hyderabad-Bengaluru) and Gaya (Amritsar-Kolkata) corridors. This initiative aims to spur industrial growth in eastern India. Fourteen large cities with a population of above 30 lakh will have transit-oriented development plans, the budget says, aiming for an urban planning strategy that promotes high-density, mixed-use development within walking distance of public transit facilities. “It’s a welcome gestureâ€æthe ministry of urban affairs issued a detailed advisory last year. Real action has, however, been slow,” says Jagan Shah, urban policy expert and CEO of Infravision Foundation.
Sitharaman has opened the purse strings enough to keep the show going. The Union Budget gives no indication that India’s lavish spend on creating new infrastructure is on the slow lane.