Ahead of the election year, a pro-people budget with development agenda
Expected to be a populist budget ahead of the elections, the Finance Minister seems to have stuck to the script and tried to build in something for everyone. Budget’s focus on “Ease of Living”, healthcare to poor, rural infrastructure, and MSME sectors is expected to would go well with the electorate, and the investors should be relieved that despite budget being presented in an environment of parliamentary elections, it apparently does not divert focus from the fiscal road map. Achievement of 2017-18 disinvestment target of Rs. 72,500 crore is noteworthy. Increasing this target to Rs. 80,000 crore in 2018-19 seems logical. Hopefully, excess liquidity from divestment of infra-related companies will be ploughed back into the infrastructure sector.
The FM cited that the country needs Rs. 50 lakh crore to create world-class infrastructure, consequently the infra outlay has been increased by 20%, to Rs. 5.97 lakh crore. Complementing this budgetary allocation with private investment would be crucial. However, the budget seems to be signalling a higher reliance on government spending while attracting private investment through bonds. Though past experience does not validate the success of bond market in India, a clearer picture will emerge only after definite implementation plans are chalked out. As a cornerstone to connectivity enhancement, the budget furnished adequate attention to railways. Railways’ capex for 2018-19 is pegged at Rs. 1.48 lakh crore for capacity creation, passenger safety, doubling of lines, and electrification. Besides continued focus on ‘safety first’, other noteworthy mentions include redevelopment of 600 major railway stations, provision of escalators in stations with over 25,000 footfalls, Wi-Fi and CCTVs in all stations, and Railway University to enhance skills required for new high speed rails.
Specific attention to improving suburban train system in Mumbai is a heartening announcement. However, more attention could be accorded to enhance public transportation in budding cities, other than Mumbai and Bengaluru, as also next steps for marquee initiatives like vehicle electrification, and Sagarmala. In the context of roads and highways, the FM announced that NHAI will raise funds from the equity market by organizing its mature road assets into Special Purpose Vehicles and using monetizing structures like TOT (Toll, Operate and Transfer) and InvITs (Infrastructure Investment Funds). This is expected to spur private investments in the sector. In the Logistics space, establishment of a National Logistics Portal as a single window online market place to link all stakeholders is a step in the right direction and is expected to go a long way in furthering government’s efforts of enhancing ease of doing business.
Development of 10 Iconic Tourism destinations and upgradation of amenities at 100 ‘Adarsh’ monuments would also boost infrastructure creation, local economic development, and aid job creation through a trickle-down effect. Further, after assigning infra status to affordable housing in the previous budget, this year, an increased outlay of Rs. 25,000 crore (up from Rs. 6,500 crore) for Affordable Housing, along with creation of a dedicated Affordable Housing Fund under National Housing Bank for priority sector lending, is a welcome step. Doubling of allocation for Digital India programme, and expanding it to focus on Artificial Intelligence, Machine Learning, Robotics, and Blockchain are also logical next steps for driving the country ahead on the digital curve.
Overall, in terms of infrastructure, I would say, while rural and farm sector, affordable housing, and railways received a fair bit of attention in terms of allocations, one would have liked to see more across other sectors, especially regarding follow on of announcements from the previous budgets. Whether there will be on-ground action in renewal and development of cities, uptake of infrastructure funds, implementation of railway safety initiatives, or development of industrial corridors, in absence of a follow on mechanism, is yet to be seen. Creation of dedicated funds for infrastructure creation in fisheries and animal husbandry are welcome steps in meeting government’s target of doubling farm incomes. The focus on MSMEs, rural and informal sector, women workforce, health care for poor families, education, construction sector, defense modernisation, digital infrastructure and blockchain, are all welcome moves, however the devil could be in the detail.
