(File) Workers of Solar Square place a panel on the rooftop of a residence in Gurugram on the outskirts of New Delhi, India. AP
After achieving a fresh mandate for a third consecutive term, the NDA government is poised to present the Union Budget 2024 in the month of July. As India plans on becoming the third largest economy in the world, the budget is expected to focus heavily on infrastructure spending across all sectors. Investments in these sectors would be fundamental to not only expand the capital expenditure base but it would be vital to boost urban growth, reduce greenhouse gases for achieving sustainable growth over the next years.
Based on the recent policies and initiatives of the Union government we expect initiatives and novel policies in the upcoming Union Budget 2024 on the following lines.
Overall infrastructure allocation
Under the Interim Budget 2024-25, the budgetary allocation for the infrastructure sector was increased to Rs 11.1 lakh crore making it around 3.4 per cent of the GDP. We expect a similar momentum to be carried forward in the upcoming budget. The need for boosting infrastructure spending is critical to India becoming a $30 trillion economy by 2047 and as the need to support the growth of tier-2 towns rural and semi-rural areas is felt across the spectrum.
Transportation
With the rising migration to Indian cities, transportation has become a key lever of growth and sustenance. We expect robust private investments in ports, airports, roadways and the real estate sector over the next years, which will need to be supported by fiscal incentives and programmes. We expect robust fiscal spending and growth in allocations under the existing programmes like UDAAN, Bharatmala, Sagarmala, and Bharat Net, and the Gati Shakti master plan.
I. Railways
India is revamping its existing railway infrastructure by introducing new transport corridors along with development of new modes of rail transportation like the Hyperloop system currently under discussion with the Swiss government. To ensure fast movement within the cities, Rs 24,931 crore had been allocated under the Interim Budget for development of metro projects which is 7.57 per cent more than the previous year. The three economic corridors namely port connectivity corridors, energy, mineral and cement corridors and high traffic density corridors within India will also increase the efficiency and effectiveness of railway sector. India is also carrying out the development of India-Middle-East-Europe Economic Corridor which is set to improve connectivity across nations.
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II. Roadways
Alongside railways, road transportation is also expected to receive massive capital push as seen in the 20% growth in NHAI’s capital expenditure in FY 2023-24. We can expect the budget to also lay the groundwork for change in PPP structures across the sector to make the process more accountable, improvement in VGF fundings, etc. so that the projects achieve timelines and do not get embroiled in delays and disputes. Further incentives for the growth of electronic vehicles, charging infrastructure battery swapping stations, energy storage systems and the overall development of hybrid vehicle ecosystem is also expected in this edition of the Union Budget. Moreover, in the light of recent incidents, we can also expect a budget allocation to improve the safety and reliability of rail and road infrastructure.
III. Ports
As India plans on connecting itself to all major markets across the globe, we expect robust funding allocations to development of ports under programmes like Sagarmala and the hub development programmes under the Green Hydrogen Mission.
Power
One of the main focus areas in expanding the power sector and ensuring power to all is development of grid connectivity. Bolstering grid infrastructure and providing funds for repair and maintenance of the national grid may help in improving energy accessibility. With rising supply of electricity bolstered by addition of renewable energy. There is a need to increase investment in maintenance of grid infrastructure as well as provide necessary support to state electricity distribution companies as they reel under a constant circle of debts.
Alternate energy and fuels
India is not just looking at solar and wind power to meet its net zero goals but also other green avenues such as green hydrogen, biogas, biomethane and ethanol blending of fuels. We expect that a growth-oriented tax regime combined with incentives to encourage domestic manufacturing under the Make in India Initiative may be beneficial for adding manufacturing capacity in these sectors.
I. Solar
Last year the government re-introduced production linked incentive scheme for high efficiency solar manufacturing with an initial budget of Rs. 24,000 crore. Considering the need for solar energy is set to increase to achieve the ambitious net zero goals, we expect that the financial allocation in the solar sector will undergo a boost for indigenous production of solar panels.
II. Hydrogen
Furthermore, as the government aims to establish green hydrogen production capacity worth 5 MMT per annum, it has allocated Rs 19,744 crore under the National Green Hydrogen Mission and the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme for research and development and pilot projects for the safe usage, transportation of hydrogen and domestic manufacturing of electrolyzers. Based on the long-term vision of achieving sustainability, government may allocate the funds to increase the manufacturing of electrolysers, store and transport hydrogen and create the necessary demand for it.
III. Biogas
The Union government is also aiming to promote biogas generation as it plans to make compressed biogas blending obligation mandatory from 2025 onwards. There may also be expansion of city gas distribution pipeline for the ease in transporting the biogas and to achieve grid connectivity for the upcoming compressed biogas plants.
Overall, we can expect tax incentives to fuel the adoption of energy efficient solutions and digital infrastructure across all infrastructure sectors.
Real estate and hospitality
As the average purchasing power of households increase there is a boost to tourism and real estate sector. Over the past five years there has been a steady increase in the contribution of tourism and hospitality industry in the GDP averaging to around 6 per cent per annum. For keeping the momentum strong there would be a need to provide incentives for real-estate and hospitality sectors which may include grant of infrastructure status to individual tax incentives.
Conclusion
As India hopes to become a five trillion-dollar economy over the next years, it would need to leverage all possible avenues to cement a strong foundation. The resulting infrastructure stimulus can not only make a large capital base for growth of markets, it can provide job security and base for expanding urban areas for a long period of time. Resolving the sector specific issues by ensuring adequate financial assistance and allocation may not only help India achieve sustainability, growth and a stability but it may also hold the key to making India self-reliant and a leader of a new green world.
The author is Partner, IndusLaw. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.
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