Finance minister Nirmala Sitharaman has followed a stable trajectory in all her Union Budgets since 2019. This year’s budget speech, though, was unusual in not mentioning allocations for specific Infrastructure sectors. The unsaid implication being – execute and implement existing projects in large sectors like highways and railways. Of the allocation to Infrastructure of an unprecedented ₹11.11 trillion announced in July 2024, ₹6.44 trillion was spent till December 2024; this spending would of course go up by end-March 2025. The current Union Budget provides ₹11.21 trillion for infrastructure for 2025-26. In the Budget documents, the accompanying report on ‘Implementation of Budget announcements 2024-25’ is a must read.
Instead, FM gave much more emphasis on incentivising state governments and cities, as well as encouraging businesses and the financial sector.
Firstly, as in earlier years, states would get 50-year loans for infrastructure, with ₹1.5 trillion provided this year, subject to states agreeing to implement some reforms.
Second, every Union ministry and state government would declare a three-year pipeline of public-private-partnership (PPP) projects. This would benefit private sector bidders.
Third, the discourse on better cities as growth engines has markedly increased over her last few budget speeches. Urban sector reforms are being incentivised in governance, municipal services, urban land, and planning. A new Urban Challenge Fund of ₹1 trillion would be set up; current year’s allocation is ₹10,000 crore. This would finance up to 25% for projects on ‘Cities as growth hubs’, ‘Creative redevelopment’ and ‘Water and sanitation’. The financing structure would include at least 50% funding from bonds, bank loans and PPP, enforcing market discipline for bankable projects. It would be interesting to see if the projected ₹40,000 crore is spent on such projects this fiscal.
Fourth, tourism for employment came in for special mention. Like the Smart Cities challenge, states would partner in improving the top 50 destinations through a challenge mode. States would provide land for tourism infrastructure. Skilling, loans for homestays, better connectivity and performance-linked incentives for destination management including tourist amenities, cleanliness, and marketing efforts should make a difference over the next few years in employment generation and the experience of tourists.
Fifth, the Jal Jeevan mission implemented through state governments has already provided tap water supply to 15 crore rural households, 80% of rural India since its launch in August 2019. An incredible achievement, transforming the lives of rural women and households. The JJM would attain 100% coverage by extending the Mission to 2028.
Sixth, states would be encouraged for further power distribution reforms. Finally, an ‘Investment Friendliness Index of States’ to be launched in 2025 would incentivise more state level reforms.
As Friday’s Economic Survey said, action would be required from state governments in terms of deregulation and encourage private enterprise by ‘getting out of the way’ of business.
In the power sector, the highlight was a Nuclear energy mission targeting 100GW by 2047. Small Modular Reactors (SMR) would get 20,000 crore to have at least five SMRs in eight years.
Air traffic has already been democratised through Udan, connecting 88 destinations; 120 more destinations are proposed. We can expect more high-speed rails in future once the Mumbai-Ahmedabad HSR starts, which could replace short-haul flights.
A Maritime Development Fund would be set up with a ₹25000 crore fund corpus, for long term finance: 49% coming from the Centre. Shipbuilding would be promoted as a job creator.
Refinance through asset monetization would get a boost, with an updated Asset monetization Plan 2025-30 for ₹10 trillion, compared to the ₹6 trillion proposed under the earlier NMP. For infrastructure finance, the harmonized master list of infrastructure would expand to include 50 tourism destinations, and shipbuilding. The private sector would benefit through more PPPs being available, and the opening up of PM Gati Shakti data with relevant data and maps. Businesses would also leverage a National Geospatial Mission.
Three of six domains in which FM mentioned transformative reforms are in infrastructure. The other three, taxation, financial sector and regulatory reforms would help all sectors including infrastructure.
Shailesh Pathak is former CEO of L&T IDPL
