Growth Engine

The government continues to bet on high infrastructure spending to get growth going. It is time to focus on getting the execution right.

- Anilesh S. Mahajan

Great emphasis has been laid on infrastructure in the recent Budget, with allocations being increased by 10.5 per cent from the last financial year to ₹3.96 lakh crore. With gross domestic product (GDP) growth likely to drop this year, the hope is clearly that increased public spending on infrastructure will spur private investment as well.

There are, however, severe challenges. Three years ago, in May 2014, the road sector alone had run up a staggering ₹74,088 crore of debt, of which ₹9,875 crore was at serious risk of turning bad. Since then, Minister of Roads and Highways Nitin Gadkari has evolved a low risk hybrid model by which part of the financial risk of road building is borne by the concerned government organisation – such as the National Highway Authority of India – and only the remaining devolves on the private player. In September last year, Welspun Enterprises Ltd, which is building the Delhi-Meerut Expressway, became the first player to achieve financial closure under the new scheme. Gadkari’s initiative has also revived the construction equipment market, which after contracting for three consecutive years, reversed the trend and grew two per cent in 2015/16. It is expected to do even better this fiscal.