The upcoming budget will be the first under ‘Modi 3.0’ and experts suggest that increasing capital expenditure is needed not only for roads and railways but also for airports, urban infrastructure, the energy sector, and sustainable development projects to help India reach its economic objectives.
Kuljit Singh, Partner at EY India, shared some important thoughts on what the government can do to boost infrastructure in the country.
“India’s upcoming budget must address critical infrastructure reforms to propel economic growth and sustainability. Key expectations include ramping up private participation in airports and railways by privatising existing airports and privatising or listing Dedicated Freight Corridor (DFC) corridors. There is also a pressing need to reduce government stakes in rail-related entities like IRCON and IRCTC, thereby enabling the government to recycle freed capital.” said Singh.
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Singh also highlighted the need to focus on the electric vehicle (EV) sector. He believes that declaring the EV sector as infrastructure and extending benefits under the FAME scheme are imperative steps for enhancing EV penetration.
“The declaration of the electric vehicle (EV) sector as infrastructure and the extension of benefits under the FAME scheme are imperative steps for enhancing EV penetration,” added Singh.
Recognising smart meters as essential infrastructure will enhance efficiency in energy management. Improving electricity distribution, particularly through innovative strategies such as central government takeover of consistently poorly performing state discoms, is crucial given the preference against privatisation in India.
To stimulate the green energy sector, Singh suggests providing viability gap funding to encourage the production of green hydrogen and biofuels. This can help India move towards a more sustainable future.
Another key point raised by Singh was the need to rebalance tax structures for domestic investors. He believes that addressing disparities with foreign investors in the same infrastructure investments is essential for equitable growth. This means making sure that domestic investors are not at a disadvantage compared to their foreign counterparts.
Alleviating pressure on banks from infrastructure debt is another critical area. Singh proposes establishing a new entity to purchase bonds from greenfield infrastructure projects and aggregating them for retail and institutional investors. This can help ease the burden on banks and provide more opportunities for investment in infrastructure.
Singh also mentions the importance of addressing cash flow challenges in infrastructure projects. Allowing infrastructure projects to distribute all available cash to investors, irrespective of accounting profits or regulatory restrictions, can boost investor confidence and enhance project viability.